The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

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Answer 1

Question

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

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Which of the following concerning short-term financing methods is CORRECT? Group of answer choices: Accruals and accounts payables do not carry explicit interest charges. Firms generally have a good control over the level of accruals. Commercial papers typicall have maturities between nine months to one year. Short-term bank loans typically require assets as collateral. Commercial papers typically carry similar interest rates to prime rates.

When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm has total current assets of $1,780,195,300 and current liabilities of $1,369,381,000. What is the firm’s current ratio? If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal?

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 debtor

Answer 2

Question

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

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Answer 3

Question

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

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Answer 4

Question

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

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Answer 5

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

Answer 6

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

Answer 7

Chapter 16, Problem 23QTD

a)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

Answer 8

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

Answer 9

b)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

Answer 10

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

Answer 11

c)

Summary Introduction

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 16 - Prob. 1QTD Ch. 16 - Prob. 2QTD Ch. 16 - Prob. 3QTD Ch. 16 - Prob. 4QTD Ch. 16 - Prob. 5QTD Ch. 16 - Prob. 6QTD Ch. 16 - Prob. 7QTD Ch. 16 - Prob. 8QTD Ch. 16 - Prob. 9QTD Ch. 16 - Prob. 10QTD

The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

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To discuss: The impact of annual cost of financing for a line of credit agreement if the bank increases prime rates.

To discuss: The impact of annual cost of financing for a line of credit agreement if the bank decreases its compensating balance necessities.

To discuss: The impact of annual cost of financing for a line of credit agreement if company’s average bank balance upsurges as the outcome of its introducing extra strict credit and collection policies.

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