Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
4th Edition
ISBN: 9780134101477
Author: Berk
Publisher: PEARSON
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Question
Chapter 27, Problem 1P
Summary Introduction
To determine: The company which has high short-term financing needs.
Introduction:
Many small-scale businesses need short-term financing rather than long-term financing; that is, for the period of one year. Seasonal businesses are most likely to have short-term financial needs for their kind of business.
Expert Solution & Answer
Explanation of Solution
Given information:
The given companies:
a) A clothing retailer,
b) A professional sports team,
c) An electric utility,
d) A company that operates toll roads,
e) A restaurant chain.
Explanation:
The companies which are not likely to have high short-term financing needs are as follows:
An electric utility is a company, which operates toll roads, and a restaurant do not have high short-term financing needs as they are not seasonal parties. These companies will have
Hence, options c), d), and e) companies do not have high short-term financing needs.
The companies which are likely to have high short-term financing needs are as follows:
A professional sports team and clothing retailer are likely to have high short-term financing needs. This is because these companies have seasonal markets and they need finance during the non-profitability period. Professional sports team needs finance to advertise, purchasing equipment, and sell tickets post-season.
A clothing retailer needs more finance to handle the negative cash flow shock. For example, if the retailer purchases unwanted stocks (that is, unrelated products), then the shortfall has to be borne by him; he will need more finance for the upcoming season.
Hence, options a) and b) are likely to have high short-term financing needs.
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Chapter 27 Solutions
Corporate Finance (4th Edition) (Pearson Series in Finance) - Standalone book
Ch. 27.1 - Prob. 1CCCh. 27.1 - What is the effect of seasonalities on short-term...Ch. 27.2 - Prob. 1CCCh. 27.2 - What is the difference between temporary and...Ch. 27.3 - Prob. 1CCCh. 27.3 - Describe common loan stipulations and fees.Ch. 27.4 - What is commercial paper?Ch. 27.4 - How is interest paid on commercial paper?Ch. 27.5 - Prob. 1CCCh. 27.5 - What is the difference between a floating lien and...
Ch. 27 - Prob. 1PCh. 27 - Sailboats Etc. is a retail company specializing in...Ch. 27 - What is the difference between permanent working...Ch. 27 - Quarterly working capital levels for your firm for...Ch. 27 - Prob. 5PCh. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Which of the following one-year 1000 bank loans...Ch. 27 - The Needy Corporation borrowed 10,000 from Bank...Ch. 27 - Prob. 11PCh. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - The Signet Corporation has issued four-month...Ch. 27 - Prob. 15PCh. 27 - Prob. 16PCh. 27 - Prob. 17PCh. 27 - Prob. 18P
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