Asked by Dhabole Sharavanin on Jul 08, 2024

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Which of the following methods CANNOT be employed by lenders to control inventory that has been used as security for a loan?

A) blanket liens
B) trust receipts
C) warehousing
D) compensating balance

Security for a Loan

Collateral or assets pledged by a borrower to secure a loan, providing a lender assurance of repayment.

Blanket Liens

A security interest covering nearly all types of collateral owned by the debtor.

Compensating Balance

A minimum balance that must be maintained in a bank account, often required by banks in return for loans or as a condition for obtaining certain services.

  • Understand the distinctions and application of short-term financial instruments.
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Verified Answer

SH
Saliyah HarrisJul 10, 2024
Final Answer :
D
Explanation :
Compensating balance is not a method of controlling inventory used as security for a loan. Compensating balance is a requirement from the lender that the borrower maintain a minimum balance in a deposit account with the lender. This is not directly related to the control of inventory. Blanket liens, trust receipts, and warehousing are all methods that lenders can employ to control inventory that has been used as security for a loan.