Question (5)

Holiday Trimmings has requested a loan to finance accounts receivable increases during its peak sales period. The company plans to repay the loan over a five-year period. Are the loan request and terms logically related?

a, Yes. As a seasonal business, Holiday Trimmings will need to finance receivables during its peak sales period, and the five-year loan term will enable the firm to better manage its cash. b. No. While Holiday Trimmings needs to finance receivables during its peak sales period, the firm should be able to repay the loan within months, from receivables collected after the peak sales period. c. No. If Holiday Trimmings needs to finance receivables during its peak sales period, it simply means that the firm is too generous in the payment terms it offers to its customers. d. Possibly. As a seasonal business, Holiday Trimmings will need to finance receivables during its peak sales period, but you need to find out what kind of terms the firm offers its customers.