Which of the following is most like a short-term collateralized loan?

• A. Bank overdraft
• B. Accrued expenses
• C. Notes payable secured by inventory
• D. Accounts payable

Answer: (C)

Verified step by step guidance

1. Understand the concept of a short-term collateralized loan: This type of loan is typically secured by an asset, such as inventory, accounts receivable, or other short-term assets, and is expected to be repaid within a short period, usually less than a year.
2. Analyze the options provided: Bank overdraft, accrued expenses, notes payable secured by inventory, and accounts payable. Determine which of these involves collateral and is short-term in nature.
3. Review the characteristics of each option: Bank overdraft is a short-term borrowing facility but does not involve collateral. Accrued expenses are liabilities incurred but not yet paid, and they do not involve borrowing or collateral. Accounts payable are amounts owed to suppliers and do not involve collateral.
4. Focus on 'Notes payable secured by inventory': This option explicitly mentions that the loan is secured by inventory, which is a form of collateral. Additionally, notes payable are typically short-term obligations.
5. Conclude that 'Notes payable secured by inventory' is most like a short-term collateralized loan because it meets both criteria: it is short-term and involves collateral (inventory).