Note 6 (Exhibit 9-2) of Le Châteaus 2014 financial statements discusses the companys line of credit. Required:
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Required:
a. What does it mean that the company has an operating line of credit of $70 million available? What kind of institution is the line of credit likely with?
b. The information regarding the interest rate on Le Ch̢teau۪s line of credit refers to Canadian prime rate. What does this term mean? Is this a fixed interest rate?
c. Le Château is required to pay a standby fee ranging from 0.250% to 0.375% on unused portions of the revolving credit. What does this mean and why would an institution charge this type of fee?
d. Is Le Ch̢teau۪s operating line of credit secured or unsecured? Explain what this means and why a company might prefer to have its debt secured.
A line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
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a An operating line of credit is a preapproved loan which can provide financing for operations at any time and in this case up to three years from Apr...View the full answer
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GERALD KAMAU
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