Exam 20: Short-Term Financial Planning

Jim's Electrical is offered a $400,000 line of credit for six months at an APR of 9%. The bank requires that the firm keep an amount equal to 5% of the loan principal in a non-interest-earning account with the bank as long as the loan remains outstanding. What is the actual six-month interest rate paid, expressed as an 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 positive cash flow shocks?

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

Which of the following are the three reasons that firms need short-term financing?

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 level of short-term debt that the firm borrows each quarter, which best illustrates an aggressive financing policy?

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

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?

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 are Flinder's temporary working capital needs in the quarter in which they are greatest?

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?

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

How does seasonality create fluctuations in a firm's net income over a year?

What do we understand by negative cash flow shocks?

A firm has a committed line of credit with a maximum of $1.2 million and an interest rate of 12% (EAR) with a certain bank. The commitment fee is 0.6% (EAR). The firm borrows $500,000 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 companies is most likely to have the greatest need for short-term financial planning?

Occasionally, a company will encounter circumstances in which cash flows are temporarily negative for an unexpected reason. We refer to such a situation as a ________.

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

Cash flow forecasts are conducted in order to determine whether a firm has a cash flow surplus or deficit and whether such a surplus or deficit is temporary or permanent.

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 ________.

Which of the following statements is FALSE?