Short term financing is financing that a borrowers pay off over shorter payment period. Small businesses depend on short term finance to continue operations through economic downturns. Discuss the advantages of short-term loans
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Short term financing is financing that a borrowers pay off over shorter payment period. Small businesses depend on short term finance to continue operations through economic downturns. Discuss the advantages of short-term loans.
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- Describe payday loans, tax-refund advances and structured-settlement advances—the differences between these financing products and the concerns that are associated with similar short-term loan products. Specifically, explain the effect these can have on your future cashflow.An advantage to the borrower of obtaining operating capital under a "line of credit" instead of with several single-payment loans is: A. the borrower pays interest on loan funds only for the time they are actually used B. the interest rate is usually lower C. expectations about how much will be repaid and when are more definite D. more total dollars can be borrowedImagine that you are in the position of buying loans in the secondary market (that is, buying the right to collect the payments on loans ) for a bank or othe r financia l services company.Explain why you would be willing to pay more or less for a given loan if: a. The borrower has been late on a number of loan payments b. Interest rates in the economy as a whole have risen since the bank made the loan c. The borrower is a firm that has just declared a high level of profits d. Interest rates in the economy as a whole have fallen since the bank made the loan
- A firm with seasonal sales would probably select which of the following types of loans from a bank to fund the need for a fixed amount of additional capital during the season of peak demand? a. Term loan b. Installment long-term loan c. Long-term transaction loan d. Unsecured short-term loanWhy use short-term financing? Cash flows from operations may not be sufficient for a firm to keep up with growth-related financing needs, or the firm may not be able to always generate enough cash flow to maintain a surplus of cash. Firms prefer to borrow now to fulfill their capital requirements through means of short-term financing or long-term financing. Both methods have their advantages and disadvantages. The following statement identifies a possible characteristic of short-term financing. A. Consider this case: Short-term credit agreements are more restrictive than long-term credit agreements. Identify whether the preceding statement is true or false. This statement is false. This statement is true. B. Firms use a variety of short-term financing sources to support working capital. Use the descriptions in the following table to identify the short-term financing source. Description Short-Term Financing Source Continually recurring…In the credit market model with asymmetric information, determine how a consumer will respond to an increase in the fraction of bad borrowers in the population. And discuss how the credit market model with asymmetric information shows how a financial crisis can reduce consumption.
- I am currently working on a study guide and came across the following question. Which of the following statements correctly reflects the effects of granting credit to customers? a) total revenues may increase if both the quantity sold and the price per unit increase when credit is granted b) a firm's cash cycle generally increases if credit is granted, all else equal c) both the cost of default and the cost of discounts must be considered before granting credit d) a firm may have to increase its borrowing if it decides to grant credit to its new customers e) all of the above My professor stated that the answer is all of the above, but after going through the readings and resources provided I could not find a way to understand how each answer is considered to be correct. I also e-mailed my professor and am waiting for a response, so I decided to post my question here as well.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 receivableThe economy is said to be entering a recession but your company needs to borrow money for an immediate need. Should you borrow on a long-term or short-term basis? Why?
- Which of the following is not a way in which banks lend short-term unsecured loans? a. Through a guaranteed credit line that has a commitment fee for any unused amount for the year b. Through credits cards lines with a certain credit limit c. By sending the amount earned from trust and investment products offered by the bank d. By lending a single date maturity loan to a debtorWhat are some of the major differences between loans for residential and commercial real estate? What types of risk does the LENDER face in making commercial real estate loans? What potential benefits does the lender receive? What types of risk does the BORROWER (or OWNER) face when taking a commercial real estate loan? What is the potential benefit? What is meant by positive financial leverage? What about negative financial leverage? What drives the spread between 10-year commercial mortgage rates and the 10-year Treasury yield seen in Exhibit 16-2?Asset-based lending is typically used to finance a. accounts receivable b. real estate. c. construction and development projects. d. accounts payable A credit facility is another name for: a. a branch bank. b. credit cards. c. Loans and agreements to make loans. d. wholesale banking. The prime rate is a. the base rate conventional loans b. the base rate on international loans c. none of the above d. the base rate on consumer loans The effective yield on the loan is the least when the loan is priced at a. 360-day year/actual number of days b. 365-days/actual number of days c. nominal rates/365 days d. 360-day year/30-day months Credit cards are one example of a. term loans b. open-end lines of credit c. closed-end lines of credit d. amortized payment loans
