Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following is a primary factor that determines the interest rate charged on borrowed money when using credit?

The company's inventory turnover ratio

The borrower's creditworthiness and risk profile

The number of employees in the borrowing company

The amount of dividends paid to shareholders

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Verified step by step guidance

Understand the concept of interest rates: Interest rates are the cost of borrowing money, typically expressed as a percentage of the principal amount borrowed.

Identify the primary factor influencing interest rates: Lenders assess the borrower's creditworthiness and risk profile to determine the likelihood of repayment. This includes evaluating credit history, financial stability, and other risk indicators.

Eliminate irrelevant factors: The company's inventory turnover ratio, number of employees, and amount of dividends paid to shareholders are not directly related to determining interest rates. These factors may influence other aspects of financial performance but are not primary determinants of borrowing costs.

Focus on creditworthiness and risk profile: Creditworthiness is assessed through metrics such as credit scores, debt-to-income ratio, and past repayment behavior. A higher risk profile typically leads to higher interest rates to compensate for the increased risk.

Conclude that the borrower's creditworthiness and risk profile are the primary factors determining the interest rate charged on borrowed money when using credit.