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WorksheetsModule 3
Total questions: 18
Worksheet time: 13mins
The length of time in which the firm purchases or produce inventory, sell it and receive cash. (Identification)
(a)
To measure the firm’s operating cycle, the following formula can be used: Operating Cycle = Inventory Conversion Period + Average Collection Period 𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝐶𝑦𝑐𝑙𝑒 = 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑥 365/𝐶𝑜𝑠𝑡 𝑜𝑓 𝑆𝑎𝑙𝑒𝑠 + 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑥 365/𝐶𝑟𝑒𝑑𝑖𝑡 𝑆𝑎𝑙𝑒𝑠
True
False
refers to debt originally scheduled for repayment within one year. It is also used to finance all or part of the firm’s working capital requirements and sometimes to meet permanent financing needs.
Spontaneous source of short-term financing
Secured Loans
Unsecured Credit
Short-term financing
includes all those sources that have as their security the lender’s faith in the ability of the borrower to repay the funds when due.
Spontaneous source of short-term financing
Secured Loans
Unsecured Credit
Short-term financing
involve the pledge of specific assets as collateral in the event the borrower defaults in payment of principal or interest.
Spontaneous source of short-term financing
Secured Loans
Unsecured Credit
Short-term financing
are sources that arise automatically from ordinary business transaction.
Spontaneous source of short-term financing
Secured Loans
Unsecured Credit
Short-term financing
are sources that require special effort or negotiation.
Spontaneous source of short-term financing
Secured Loans
Unsecured Credit
Short-term financing
Nonspontaneous negotiated of short-term financing
As the firm’s sales increase, so does its labor expense, value-added taxes, income taxes and so-on. Since most businesses pay their employees only periodically, they accrue a wages payable account in essence a loan from employees. -not a quiz
(a)
(a) _ provides one the most flexible sources of financing available to the firm. It is also a primary source of spontaneous financing because it arises from ordinary business transactions.
is an unsecured short-term (six months or less) promissory note sold in the money market by highly credit-worthy firms. (Identification)
(a)
Pledging or Assignment of Accounts Receivable
Accounts Receivable are considered by many lenders to prime collateral for a secured loan. Under pledging arrangement, the borrower simply pledges or assigns accounts receivable as security for a loan obtained from either a commercial bank or finance company. (Not a question)
Answer: I love my baby
(a)
Cost of Financing
A disadvantage associated with this method of financing is its relatively high cost owing to the interest rate charged on loans which is 2% to 5% higher than the bank’s prime rate and processing or handling fee of about 1% to 2% on pledged accounts/ (not a question ) Answer: GMDB (Goodluck Mahal Do your Best!!!)
(a)
involves the outright sale of the firm’s accounts receivable to the finance company. (identification :>)
(a)
Inventory Financing - (a) A firm may also borrow against inventory to acquire funds. The extent to which inventory financing may be employed is based on the marketability of the pledged goods, theirassociated price stability, and the perishability of the product. (Not a question) Answer: love kita bebi
Is an instrument acknowledging that the borrower holds the inventory and proceeds from sales in trust for the lender.
Blanket Inventory Lien
Trust receipts/ Chattel mortgage Agreement
Warehousing
this gives the lender a general lien or claim against the inventory of the borrower.
Blanket Inventory Lien
Trust receipts/ Chattel mortgage Agreement
Warehousing
Under this arrangement, goods are physically identified, segregated, and stored under the direction of an independent warehousing company.
Blanket Inventory Lien
Trust receipts/ Chattel mortgage Agreement
Warehousing
Who do you love the most?
Stephanie D. Dela Resma
TepTep
Bebi/Baby/Honeybunch/Mahal/ etc.
Love of my life, sunshine, other half, honeysugarplummy tepicakes
All of the above
