Lulu’s Pies is looking for financing to improve their As Lulu’s Pies expecting high receivables, owner is considering Factoring. As a banker, explain to the owner what Factoring is and advice TWO (2) advantages and TWO (2) disadvantages of choosing this type of financing.
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Lulu’s Pies is looking for financing to improve their As Lulu’s Pies expecting high receivables, owner is considering Factoring. As a banker, explain to the owner what Factoring is and advice TWO (2) advantages and TWO (2) disadvantages of choosing this type of financing.
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- Christy would like to improve the current ratio of her firm, which is now 0.5, so that she will have a better chance of obtaining a working capital loan. Which of the following options would improve her current ratio? a. purchase additional inventory on credit b. use cash to pay off notes payable c. collect some of her accounts receivables d. borrow short-term funds to pay off some payablesIf you were a wise credit card user, under which of the following conditions would you consider using a credit card to finance an expensive purchase? a. If I haven't reached my credit limit and I really want to item b.If I believe my money situation will be better (for example, a better-paying job) in the future than it is now. c.If I have the money to pay for the item in my bank account and plan to immediately pay the balance in full. d. If my card has good rewards on it.This is a Debt Coverage Ratio or DCR question for part a and a CAP rate question for part b]. Wendy is going to purchase a commercial building and is working with a commercial lender at her local bank. The bank has some loan parameters that Wendy must follow. Understanding the rules will allow her to calculate her cash, income, and payment projections. The bank requires a 1.4 debt coverage ratio for her project. Wendy needs to calculate her net operating income or NOI first. The debt coverage ratio is based on this number. Then she will apply for a 20 year loan at 5% with annual payments. Information on the property includes: Gross rents- $780,000 Vacancy 5% Salaries $85,000 Other Fixed Expenses $125,000 Variable Expenses 20% of gross rents. NOI=_________________ Use the NOI and Debt Coverage requirement to calculate the answer. What is the largest annual payment the bank will allow? If Wendy had to buy the property at a 6% CAP (capitalization) rate, what is the asking price?
- A. Determine the decision nature of each of the following issues: What are the least expensive sources of funds for the firm? A large retailer such as LuLu Hypermarket, deciding whether to open another store? Will we purchase on credit or will we borrow in the short term and pay cash? The decision to develop and market a new software by a company such as Microsoft. Choosing among lenders and among loan types?You are developing a new product and you use a 12% discount rate to compute its NPV. Your banker, from whom you hope to obtain a loan, expresses concern that your discount rate is too low. How do you respond?Second Republic Bank is a lending company that operates in the Southeastern United States. Current economic conditions have kept lending rates low, whichlimits the revenue potential for Second Republic. The bank manager, Vivian Caldwell is concerned about understanding and then controlling costs, and shedecided to try out time-driven ABC. As a pilot, she decided to focus on understanding the cost of taking a customer’s loan application. Vivian knew that it tooklonger to collect applicant information for a mortgage than it did for other types of loans, like auto loans or unsecured loans, but did not know the cost differences,so she collected the following information from a regional branch office.There are two loan application specialists, each earning $112,320 per year. Vivian determined that fringe benefits average 10% of salary and that the officesupport costs for an employee (computer, office space, etc.) in that regional branch averaged $16,848 per employee. Factoring in time off…
- 1. Explain how a firm that expects to need funds in the upcoming year might make sure the needed funds are available. 2. How does the uncertain nature of a firms sales due to Covid-19 influence its decision regarding the amount of short-term credit to use in its financing strategy? 3. What kinds of firms use commercial paper? Could the grocery shop in neighborhood borrow using this kind of credit? 4. From the standpoint of a borrower, is long-term or short-term credit riskier? Explain. 5. From the standpoint of an investor, is equity or debt riskier? Explain. 6. Give a report(one paragraph) of any company (either local or international) that using venture capital as a source of financing.You plan to invest in one of two home delivery pizza companies, High and Low, that were recently founded and are about to commence operations. They are identical except for their use of debt () and the interest rates on their debt--High uses more debt and thus must pay a higher interest rate. Based on the data given below, how much higher or lower will High's expected EPS be versus that of Low, i.e., what is EPSHigh - EPSLow?Pay day loans are short term loans that you take out against future paychecks: The company advances you money against a future paycheck. Either visit a pay day loan company, or look one up online. Be forewarned that many companies do not make their fees obvious, so you might need to do some digging or look at several companies. Explain the general method by which the loan works.
- A lending officer at C Bank has insisted that your firm improve the current ratio of 0.8 before the bank will consider a loan. Which of the following actions would INCREASE the ratio? Group of answer choices: Selling some of the existing inventory at cost Using cash to pay off current liabilities Borrowing long-term debt to pay off short-term bank loan Paying off long-term debt. Collecting some of the current accounts receivable1. Glenn is weighing whether to buy an equipment for his new computer shop, and weighs the pros and cons, he does his analysis using the net present value method. What do you call the process that he is making? A. Capital Budgeting B. Investment Analysis C. Financial Decision Making 2. What concept of bias that practices guarding some money cautiously when we mentally categorize it for a house, but spend it liberally when it's "fun money". A. Mental accounting B. Outcome Bias C. Overconfidence bias 3. What type of bias relies too heavily on one piece of information in making a final decision? A. Availability Heuristic Bias B. Bandwagon Effect C. Anchoring BiasTamara is not a big spender and rarely has a credit card balance over $500. What should Tamara look for in a credit card given the way she uses one? Group of answer choices a. A long grace period b. A low interest rate c. A high annual fee d. No grace period e. A high interest rate