HoneySing is a commercial enterprise which markets materials of construction to building contractors. It gives a 1 month credit facility to its customers, and it is not its commercial practice to charge interest on overdue debts. It has a floating rate loan with Hulu bank at a variable interest rate which is currently 6% per year. The previous year’s rate was 4%. The company is expecting the rate of interest to increase further in the near future. Required: Comment on the interest rate risk faced by HoneySing and the repercussions an adverse movement will have on the company.
HoneySing is a commercial enterprise which markets materials of construction to building contractors. It gives a 1 month credit facility to its customers, and it is not its commercial practice to charge interest on overdue debts. It has a floating rate loan with Hulu bank at a variable interest rate which is currently 6% per year. The previous year’s rate was 4%. The company is expecting the rate of interest to increase further in the near future. Required: Comment on the interest rate risk faced by HoneySing and the repercussions an adverse movement will have on the company.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter22: Providing And Obtaining Credit
Section: Chapter Questions
Problem 3P: Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of...
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HoneySing is a commercial enterprise which markets materials of construction to building contractors. It gives a 1 month credit facility to its customers, and it is not its commercial practice to charge interest on overdue debts. It has a floating rate loan with Hulu bank at a variable interest rate which is currently 6% per year. The previous year’s rate was 4%. The company is expecting the rate of interest to increase further in the near future.
Required: Comment on the interest rate risk faced by HoneySing and the repercussions an adverse movement will have on the company.
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