Exam 20: Short-Term Financial Planning

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

A firm issues two-month commercial paper with $1,000,000 face value and receives $985,000. What is the EAR the firm is paying for these funds?

What is temporary working capital?

DressUp! is a clothing retailer specializing in costumery. The financial forecast for a year is shown in the table above. All figures are in thousands of dollars. During which of the following months are the firm's working capital needs the greatest?

A firm has a committed line of credit with a maximum of $2.5 million and an interest rate of 9% (EAR)with a certain bank. The commitment fee is 0.65% (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?

A petroleum exploration company takes a short-term bank loan in order to finance the purchase of several truck-mounted, vibroseis shakers, which have unexpectedly come onto the market at a good price. Once the purchase is made, the company will obtain long-term financing. Which of the following best describes the short-term loan the company has taken?

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

What are loan origination fees and what effect does it have on the loan?

What are compensating balance and what effect does it have on the loan?

What is single, end-of-period payment loan?

What is the term used for a short-term, unsecured debt sold by a large company to an intermediary, who then resells the debt to investors in return for a fee for his or her services?

Luther Industries is offered a $1 million dollar loan for four months at an APR of 9%. If this loan has an origination fee of 1%, then the effective annual rate (EAR)for this loan is closest to ________.

Crimini Foods is offered a $400,000 line of credit for six months at an APR of 10%. This loan has a loan origination fee of 2%. What is the actual six-month interest rate paid, expressed as an EAR?

Gemini Real Estate is offered a $2 million line of credit for four months at an APR of 9%. This loan has a loan origination fee of 1.5%. What is the actual four-month interest rate paid, expressed as an EAR?

Which short-term financing policy states that short-term cash needs should be financed with short-term debt and long-term cash needs should be financed with long-term sources of funds?

General Manufacturing wants to borrow $1 million for three months. It uses its inventory as collateral for an 11% (APR)loan under a warehouse arrangement where the warehouse fee is $12,000 paid at the start of the three months. What is the EAR of this loan for General Manufacturing?

Use the table for the question(s)below. The quarterly working capital levels for Hasbeen Toys are presented in the following table (in $ millions): -The temporary working capital needs for Hasbeen Toys in quarter 3 is closest to ________.

A firm issues three-month commercial paper with $200,000 face value and receives $192,000. What is the EAR the firm is paying for these funds?

A firm issued three-month commercial paper with a $2,000,000 face value and received $1,964,000. The effective annual rate that this firm is paying is closest to ________.

Which of the following best describes the agreement where a firm sells receivables to a lender and the lender agrees to pay the firm the amount due from its customers at the end of the firm's payment period, with the provision that the lender will receive payment from the borrower if the customers default on their payments?