Company A, a wholesaler of womens clothing, has requested a loan for the purchase of a new truck to make deliveries to its retailers. The company plans to repay the loan in three months from the collection of accounts receivable (debtors). Are the terms of this loan logically related? Why or why not?

1. Yes. The term requested matches the timing of receipt of cash from accounts receivable (debtors)

2. Yes. It is logical that the collection of receivables over the next three months may be sufficient to repay the loan.

3. No. The company could not collect enough from customers to repay the loan in three months.

4. No. The company should use long-term financing for the purchase of a fixed asset.