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1) Suppose that you are a owner of the import business which specializes in sale of floor tiles from around the world. Your business has developed noticeably over the two years since its founding, and you are looking for the way to exchange your accounts receivable to cash more quickly than 90 days it currently takes to collect them.
What kinds of information do factors naturally ask for before initiating client services?

Requirements: min 100 words

2) Your company requires borrowing $100,000 to buy equipment. Equipment will pay for it in one year and the company is considering given alternatives for financing its purchase: Alternative a): Firm’s bank has agreed to lend $100,000 at the rate of= 14%. Interest would be discounted, and the 15% compensating balance would be needed. Though, compensating-balance needs wouldn’t be binding on company as the company usually maintains the minimum demand deposit (checking account) balance of= $25,000 in bank.

Alternative b): Equipment dealer has agreed to finance equipment with one year loan. $100,000 loan would need payment of principal and interest totalling $116,300.

i) Which alternative must your company choose?

ii) If bank’s compensating-balance need were to require idle demand deposits equal to= 15% of the loan, what effect would this have on cost of bank loan alternative?

iii) Describe the risk-return relationship involved in firm’s asset-investment decisions as that relationship pertains to its working-capital management.

iv) prepare down the advantages and disadvantages linked with use of short-term debt.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M915274

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