Loose Leaf for Foundations of Financial Management Format: Loose-leaf
17th Edition
ISBN: 9781260464924
Author: BLOCK
Publisher: Mcgraw Hill Publishers
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Question
Chapter 6, Problem 7DQ
Summary Introduction
To explain: The significance of short-term financing methods over a normal financing plan used by a firm for certain permanent current assets.
Introduction:
Short-term financing:
It is a type of financing through which the short-term needs of organizations are met. Such finance has a maturity period of less than a year and is referred to as working capital finance.
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Students have asked these similar questions
Using Problem 1, if Hogwarts Corp.’s policy is to employ Aggressive financing policy, which of the following statement would best describe the policy employed?
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a. all fixed asset and half of the permanent current assets was financed with long-term liabilities
b. all the fixed assets, permanent current assets and half of the temporary current assets was financed with long-term liabilities
c. all the fixed assets, and permanent current assets was financed with long-term liabilities
d. none of the above
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2) Using Problem 1, how much is the temporary current assets needed during April?
Which of the following statements relating to working capital financing is not correct?
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A conservative policy uses long-term debt to finance non-current assets.
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B.
Short-term debt is cheaper than long-term debt.
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C.
An aggressive policy uses long-term debt to finance fluctuating current assets.
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D.
 Long-term debt is less risky that short-term debt.
Which of the following statements is NOT CORRECT?Â
A. Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing
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B. A company may hold a relatively large amount of cash and marketable securities if it is uncertain about its volume of sales, profits, and cash flows during the coming year
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C. The cash budget is useful to help estimate future financing needs, especially the need for short-term working capital loans.
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D. If a firm wants to generate more cash flow from operations in the next month or two, it could change its credit policy from 2/10, net 30 to net 60.
Chapter 6 Solutions
Loose Leaf for Foundations of Financial Management Format: Loose-leaf
Ch. 6 - Prob. 1DQCh. 6 - Prob. 2DQCh. 6 - Prob. 3DQCh. 6 - Prob. 4DQCh. 6 - “The most appropriate financing pattern would be...Ch. 6 - Prob. 6DQCh. 6 - Prob. 7DQCh. 6 - Prob. 8DQCh. 6 - What are three theories for describing the shape...Ch. 6 - Since the mid-1960s, corporate liquidity has been...
Ch. 6 - Gary’s Pipe and Steel Company expects sales next...Ch. 6 - Prob. 2PCh. 6 - Tobin Supplies Company expects sales next year to...Ch. 6 - Antivirus Inc. expects its sales next year to be...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Boatler Used Cadillac Co. requires $850,000 in...Ch. 6 - Biochemical Corp. requires $550,000 in financing...Ch. 6 - Sauer Food Company has decided to buy a new...Ch. 6 - Assume that Hogan Surgical Instruments Co. has...Ch. 6 - Assume that Atlas Sporting Goods Inc. has $840,000...Ch. 6 - Colter Steel has $4,200,000 in assets. Short-term...Ch. 6 - Prob. 13PCh. 6 - Guardian Inc. is trying to develop an asset...Ch. 6 - Lear Inc. has $840,000 in current assets, $370,000...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Using the expectations hypothesis theory for the...Ch. 6 - Carmen’s Beauty Salon has estimated monthly...Ch. 6 - Prob. 19PCh. 6 - Eastern Auto Parts Inc. has 15 percent of its...Ch. 6 - Bombs Away Video Games Corporation has forecasted...Ch. 6 - Esquire Products Inc. expects the following...
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