Rights and Responsibilities of Debtors and Creditors are noted
A privately owned company that sells home security systems and is seeking to open new locations in the five fastest growing cities throughout the United States. To succeed, the company plans to invest in a new technological infrastructure. Because the company does not have the required capital on hand to move in this direction, it requires debt financing. The company has worked out an arrangement with a bank. The bank has put forward the following requirements to finance the debt:
? Annual audits
? Cannot change credit policies without bank approval
? Bank will loan up to 80% accounts receivable less than 120 days old
? UCC filling on accounts receivable
? All customer payments submitted to lockbox account held by bank.
Because the owner of the company has many questions concerning the use of negotiable instruments, he has hired an accountant. The accountant first task is to:
? Explain the rights and responsibilities of debtors and creditors.