A petroleum exploration company takes a short-term bank loan in order to finance the purchase of several truck-mounted, vibroseis shakers, which have unexpectedly come onto the market at a good price. Once the purchase is made, the company will obtain long-term financing Which of the following best describes the short-term loan the company has taken? OA. an uncommitted line of credit OB. bridge loan OC. promissary note OD. single, end-of-period payment loan OE. evergreen credit
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- LLCR (Loan Life Coverage Ratio)tells the banker if there is enough cash from the project to make bridge-financing even when some years are expected to have inadequate cashflows to service the debt. a.The information given above is not sufficient to judge b.Uncertain c.True d.FalseSuppose a credit analyst for JPMorgan Chase, an American multinational financial services company headquartered in New York City and the world's largest bank by market capitalization, is considering a proposal to extend a short-term, one-month loan to Apple, Inc., an American multinational technology company headquartered in Cupertino, California. Which of the following financial statement ratios would best help the credit analyst assess Apple, Inc.'s ability to repay the short-term loan? O Days' sales in receivables. O The cash ratio. O The current ratio. O The return on equity ratio (ROE).Small banks can participate in loans far in excess of their asset size by a. buying financial futures contracts b. by selling loans downstream c. achieving economies of scope d. buying participations If a firm is using financial leverage successfully, the ROE should be a. lower than if no leverage were used b. higher than the profit margin c. higher than ROA d. higher than if no leverage were used Credit card fee income comes from a. late payments b. exceeding credit lines c. all of the above d. cash advances
- 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 receivable5. Sources of short-term financing Short-term credit, or short-term financing, is any liability that is scheduled for repayment within one year. Sources of short-term funds include banks, suppliers, securities firms, and insurance companies. The obligations are in the form of bank loans, trade credit, commercial paper, secured loans, and accruals. Some types of short-term financing are easier to obtain and manage than others. Financial managers will consider the costs of the various sources of financing as part of a cash management strategy. The following statement refers to a source of short-term credit. Select the best term to complete the sentence. as a source of financing is restricted to large firms with exceptionally good credit. The use of Newell Enterprises is a very large manufacturing company. Newell's financial managers use many sources of financing for the company's annual borrowings, which exceed $100 million. Newell's credit rating is excellent. At the moment, the…Imagine 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
- Option 1: Merit could approach JPMorgan Chas, a bank that had served Merit well for many years with seasonal credit lines as well as medium-te loans. Lehn believed that JPMorgan was unlikely to make a $4 billion loan to Merit on its own, but it could probably gather a group of banks together to make a loan of this magnitude. However, the banks would undoubtedly demand that Merit limit further borrowing and provide JPMorgan with periodic financial disclosures so that they could monitor Merit's financial condition as it expanded its operations. Option 2: Merit could convert to pubic ownership, issuin stock to the public in the primary market. With Merit's excellent financial performance in recent years, Sara thought that its stock could command a high price in the market and that many investors would want to participate in any stock offering that Merit conducted. Required: •Pros and cons of option 1 and 2 •Which option do you think Sara should recommend to the board and why?Toms UI IVesuTment to ychciut ed as a cost of borrowing to compensate the opportunity costs of the bank with I to the cash loaned to you. Moreover, the interest rate is usually expressed as nual percentage rate. activity ctions: On the space provided, write TRUE if the idea being expressed is correct and FALSE if otherwise. 1. In the most loan amortization schedules, amortization of discount or premium of the loan increases over time. 2. The process of obtaining future values is called discounting. 3. An annuity in which cash flows occur at the end of each period is called annuity. age1.) A bank has purchased a significant amount of loan receivables of another bank. The loan portfolio is made up of several home mortgages, making it essentially a mortgage-backed security. The investing bank has created its cashflow forecast from the receivable but faces the risk that if interest rates decline, principal payments will be made earlier and that interest collections will not happen. What risk does the bank face?* A.)Mortgage Default Risk B.) Mortgage Prepayment Risk C.) Mortgage Settlement Risk D.) Mortgage Extension Risk 2.) The mortgage contract states that the debtor must pay a minimum of P100,000 per year on the 7% interest, P1,000,000 loan. The balance would be due by the end of the tenth year as a lump sum. A.) Balloon payment mortgage B.) Rollover mortgage C.) Home equity loans D.) Construction to permanent mortgages 3.) Which of the following would have inflationary effect on the economy? [1] BSP releasing new bonds in the market [2] BSP decreasing the repo…
- 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.Unibank also needs to review its off-balance-sheet risk. Using the following balance sheet value of UniBank in market value terms (in millions of dollars) Assets Cash Liquid assets Loans Total assets $ 3 30 55 88 Liabilities and equity Deposits Interbank loan Equity Total liabilities and equity In addition, the bank has contingent assets with $50 million market value and contingent liabilities with $80 million market value. Why do over-the-counter contracts carry more contingent credit risk than exchange-traded contracts? $ 35 5 48 88(Liquidity analysis) 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 had total current assets of $1,908,026,400 and current liabilities of $1,362,876,000. a. What is the firm's current ratio? b. 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? c. 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? a. What is the firm's current ratio? The firm's current ratio is (Round to…
