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Exam 30: Working Capital Management

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Question 31

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Factoring refers to:

A) Determining the aging schedule of the firm's accounts receivable
B) The sale of a firm's accounts receivable to another firm
C) The determination of the average collection period
D) Scoring a customer based on the 5 C's of credit

E) B) and D)
F) B) and C)

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Question 32

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Briefly explain the process of factoring accounts receivables.

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Factoring is the sale of accounts receiv...

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Question 33

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The default rate of Demurrage Associates' new customers has been running at 10%. The average sale for each new customer amounts to $800, generating a profit of $100 and a 40% chance of a repeat order next year. The default rate on repeat orders is only 2%. If the interest rate is 9%, what is the expected profit from each new customer?

If the short-term commercial paper rate is 6% and the corporate tax rate is 35%, what yield would a corporation require on an investment in floating-rate preferred stock? Assume the default risk is the same as for commercial paper.

Discuss the general principles that should be used for credit decisions.

What is a bridge loan? Briefly explain.

A variable rate demand bond (VRDB) : I. Is a long-term security II. Has interest payments linked to the level of short-term interest rates III. May periodically be sold back to the issuer at face value IV. Is tax-exempt

Which of the following statements regarding "bankers' acceptances" is true? I. Bankers' acceptances are used in overseas trading II. Bankers' acceptances are bought and sold on a discount basis III. Bankers' acceptances are guaranteed by the bank

Commercial paper (CP) issued in the USA has a maximum maturity of nine months, most CPs are sold with a maturity of

The most common benchmarks used for pricing long-term bank loans are:

Which of the following are Moody's commercial paper (CP) ratings?

What percent of syndicated loans are subsequently resold? (approximately)

A customer has ordered goods with a value of $1200. The production cost is $800. Under what conditions should you extend credit if there is no possibility of repeat orders?

Firms which receive a large volume of checks use the following to speed up availability of funds:

The most common way to finance a temporary cash deficit is the use of:

LIBOR is the acronym for London Interbank Offered Rate.

When banks have to make large loans, they form a group of banks for the purpose of making the loan. The group is called a:

The maturity of most bank loans is:

In the United States large-value electronic payments are made through: I. Fedwire II. ACH III. CHIPS

Accounts receivables include: I. Trade credit II. Consumer credit III. Inventories