Exam 20: Short-Term Financial Planning

A firm has a committed line of credit with a maximum of $10 million and an interest rate of 8.5% (EAR)with a certain bank. The commitment fee is 0.5% (EAR). The firm borrows $2 million at the start of the year and then repays it at the end of the year. What is the total cost of the loan?

Which of the following bank loan arrangements is typically accompanied by a requirement that the firm maintain a minimum level of deposits with the lending bank and restricts the level of the borrowing firm's working capital?

Which of the following statements regarding how a firm should finance its cash needs is true?

Which of the following firms is likely to have the highest short-term financing needs?

In which of the following loans can inventory NOT be used as collateral?

Which of the following best describes a conservative financing policy?

A short-term financial plan tracks a firm's cash balance and new and existing short-term financing, enabling managers to forecast shortfalls and plan to fund them in the least costly manner.

What is the average and maximum maturity of commercial paper?

Which of the following companies has the smallest need for short-term financial planning?

A blanket lien exposes a lender to less risk and thus carries less interest than a trust receipt.

Use the information for the question(s)below. -The above graph shows the levels of fixed assets, permanent working capital and temporary working capital for a certain company. If the graphs below show the excess cash reserves on hand each quarter, which best illustrates a conservative financing policy?

Which of the following best describes an aggressive financing policy?

Which of the following statements is FALSE?

What do we understand by seasonality?

What is temporary working capital?

What is permanent working capital?

Which of the following best describes a bank loan arrangement where a bank agrees to lend a firm any amount up to a stated maximum in an informal agreement which does not legally bind the bank to provide the funds?

Matt's Machine Company has borrowed $10 million for four months at 5.5% APR, using inventory stored in a field warehouse as collateral. The warehouse fee is 0.5%, payable at the end of the loan. What is Matt's EAR?

The data above shows the net working capital requirements for Flinder's Camping, a company that makes tents. All figures are in thousands of dollars. What can be considered the firm's permanent working capital?

What do we understand by negative cash flow shocks?