Use of a warehouse receipt in short-term financing indicates that
A) a loan has been secured by inventory.
B) a loan has been obtained to purchase raw materials.
C) a shipper or freight company has bought merchandise from a company.
D) fur coats are being stored in a retail location.
E) the lender is taking precautions because the loan is unsecured.

Question

Quizplus · Accepted Answer

A warehouse receipt is a document that proves ownership of goods that are stored in a warehouse. When used in short-term financing, it indicates that a loan has been secured by inventory. The lender is using the warehouse receipt as collateral, in case the borrower defaults on the loan. This allows the lender to recover some or all of their funds through the sale of the inventory.

Use of a Warehouse Receipt in Short-Term Financing Indicates That