Exam 11: Debt and Other Forms of Financing

Only a handful of very large firms have access to funding sources such as asset-backed debt securitizations, A-l commercial paper ratings, and below-prime lending rates.

The term, factoring, refers to selling accounts receivable at a discount to a finance company known as the factor.

Some suppliers use generous terms on trade credit as a form of sales promotion.This is always less effective than an intensive advertising campaign or a high-pressure sales team.

If an entrepreneur wants more credit and would like to stretch out her payables, she can negotiate with her suppliers for more generous credit terms.

Although the opportunity costs for accounts receivable may be quite large, the largest current asset balances are usually in______.

Discuss the distinction between profitability and solvency.

Net working capital is difficult to calculate; the method of taking the difference between current assets and current liabilities leaves the entrepreneur with ambiguous figures.

Net working capital is often thought of as the balance of completely liquid assets and liabilities.However, this is not completely true.Please explain why parts of working capital can become stagnant and hurt cash levels, even if a firm is growing and profitable.

Working capital requirements can fall short periodically as long as the company remains profitable.