Exam 14: Managing Short-Term Financing Liabilities

Grant Technologies needs $300,000 to pay its supplier. Grant's bank is offering a 210-day simple interest loan with a quoted interest rate of 11 percent and a 20 percent compensating balance requirement. Assuming there are 360 days in a year and Grant currently holds no funds at the lending bank, what is the annual percentage rate (APR) of the loan?

The inventory turnover of Long Corporation is 16×, and its closing inventory is $20,000. Assuming there are 360 days in a year, compute the company's inventory conversion period. (Give answer to one decimal place.)

Net working capital is equal to:

For the most part, the techniques used to manage working capital accounts in multinational corporations are same as the techniques used in purely domestic corporations. 

Which of the following mathematical equations is used to compute the payables deferral period (DPO)?

Gripp Corporation needs $765,000 to pay one of its suppliers. The bank requires a compensating balance equal to 15 percent on loans to companies. Because Gripp currently holds no funds at the lending bank, it must borrow enough to have $765,000 available to pay its suppliers after covering the compensating balance. How much must Gripp borrow so that it has $765,000 to pay its suppliers? In your computations, assume there are 360 days in a year. 

Musk Corporation needs $225,000 to pay its bills. Musk's bank offers a one-year 12 percent simple interest loan that requires a 25 percent compensating balance to be maintained with the bank. Musk currently holds no funds at the lending bank. How much must Musk borrow to ensure that it has $225,000 to pay its bills?

The following information relates to Lobo Corporation: Cash \ 20,000 Accounts receivable \ 50,000 Marketable securities \ 65,000 Notes payable \ 10,000 Accrued wages \ 5,000 Based on this information, the net working capital of the company is: } \end{array}\]

A(n) ______ is the amount a bank requires a borrower to maintain in its checking account as a requirement for getting a loan. 

Which of the following is a correct statement about commercial paper?

Because multinational corporations operate in countries with different languages, different cultures, different political environments, and different economic conditions, _____. 

Net working capital represents the amount of current assets that is financed with long-term funds. 

Tivo Corporation purchases its raw materials on credit with terms of 3/10, net 30. What is the annual percentage rate (APR) of non-free trade credit if Tivo does not take the discount and pays on Day 30. In your computations, assume there are 360 days in a year. 

______ is a type of unsecured promissory note issued by large, financially strong firms. 

A ______ is an arrangement in which a bank agrees to permit a firm to borrow any amount up to a specified maximum during a designated time period. 

Which of the following mathematical expressions computes the annual percentage rate (APR) for short-term financing?

A(n) ______ is a type of legal claim (lien) against a firm's inventory when it is used as collateral for a loan and the goods are relatively low priced, fast moving, and difficult to identify individually. 

Decisions made by multinational corporations to manage working capital accounts can have significant consequences on the long-run survival of the firms. 

The maturity matching approach calls for matching the maturities of the firm's:

Gale Corporation recently issued 270-day commercial paper with a face value of $100,000 and a simple interest rate of 11 percent. Assuming there are 360 days in a year, what is the commercial paper's annual percentage rate (APR)? The firm incurs no transaction costs to issue the commercial paper.