Explain the role of commercial banks as source of debt capital for small businesses. What types of financing are available from commercial banks?
What will be an ideal response?
Answer: Commercial banks are the very heart of the financial market, providing the greatest number and variety of loans to small businesses. Banks tend to be conservative in their lending practices and prefer to make loans to established small businesses rather than to high-risk start-ups. When evaluating a loan application, banks focus on a company's capacity to create positive cash flow because they know that's where the money to repay their loans will come from. The first question in most bankers' minds when reviewing an entrepreneur's business plan is "Can this business generate sufficient cash to repay the loan?"
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Jack Daniels Co. has $100 million in Common Equity. Hiram Walker Co. has $125 million. Both have debt on their balance sheets, but both make the same amount of after-tax profits. Which has the higher ROE?
a) Jack Daniels b) Hiram Walker c) Both the same d) Depends on the amount of debt each has and the interest rate
According to federal laws prohibiting discrimination, it is illegal to discriminate against people
a. in any aspect of employment. b. mostly with respect to hiring. c. mostly with respect to transfer, promotion, layoff, or recall. d. mostly with respect to recruitment and testing.