can be helpful for managers to understand short-term cash obligations. 6) Profitability ratios B) Asset management ratios C) Solvency ratios D) Liquidity ratios 7) A company can borrow money at a preset rate from the bank at any time without seeking approval of the loan each time it needs funds. is a description of what type of loan? A) Discount loan B) Compensating balance loan C) Line of credit D) Straight loan with preset payment schedule

Let's analyze the two questions one by one. ### Question 6: Understanding Short-Term Cash Obligations The question asks which type of financial ratio is helpful for managers to understand short-term cash obligations. 1. **Profitability Ratios (A)**: These ratios measure a company's ability to generate profit relative to its revenue, assets, or equity. They do not specifically address cash obligations. 2. **Asset Management Ratios (B)**: These ratios assess how efficiently a company uses its assets to generate revenue. While they provide insights into asset utilization, they do not focus on cash obligations. 3. **Solvency Ratios (C)**: These ratios measure a company's ability to meet its long-term debts and obligations. They are more focused on long-term financial health rather than short-term cash obligations. 4. **Liquidity Ratios (D)**: These ratios measure a company's ability to meet its short-term obligations. They include ratios like the current ratio and quick ratio, which are directly related to cash flow and short-term financial health. **Conclusion**: The correct answer is **D) Liquidity ratios**. --- ### Question 7: Type of Loan Description The question describes a loan that allows a company to borrow money at a preset rate from the bank at any time without seeking approval each time. 1. **Discount Loan (A)**: This type of loan is typically repaid at a discount to its face value and is not characterized by the flexibility described. 2. **Compensating Balance Loan (B)**: This involves maintaining a minimum balance in a bank account as part of the loan agreement, which does not match the description. 3. **Line of Credit (C)**: This is a flexible loan arrangement that allows a borrower to access funds up to a certain limit at any time without needing to apply for a new loan each time. This matches the description provided. 4. **Straight Loan with Preset Payment Schedule (D)**: This type of loan has fixed payments and does not offer the flexibility described in the question. **Conclusion**: The correct answer is **C) Line of credit**. --- ### Summary of Answers 6) D) Liquidity ratios 7) C) Line of credit