Question

Floor plan loan is a type of short-term loan to finance high priced inventory in which the purchased inventory is placed as collateral for the loan. (T/F)
On average, finance companies have higher capital-to-total-asset ratio than that of commercial. (T/F)

Finance companies are regulated at the federal and state levels similar to commercial banks. (T/F)

Generally, a captive finance company is wholly owned by major manufacturing companies with the purpose of providing financing to customers purchasing the parent company's product. (T/F)

Generally, consumer finance companies make loans to borrowers who have been refused loans at banks due to low income or poor credit. (T/F)

Answer 1

Answer:

Consider the following explanation.

Explanation:

1. True. It is generally seen in the automobile market. The purchased inventory serves as the collateral for the loan.

2. True. The higher capital provides support for the continued solvency of these comapanies.

3. False, The federal reserve has the right and authority to regulate finance companies.

4. This statement is true.

5. True. They also charge higher interest rates than banks for bearing the risk of poor credit of these borrowers.