51166 Lecture Notes - Lecture 2: Accrual, Current Liability, Bridge Loan
Document Summary
Characteristics of different types of loans (2). mmap - 4/16/2013 - mindjet. For most firms, net working capital is positive, indicating that some current assets are not financed with current liabilities. How long the firm must finance operating cash, inventory and accounts receivables from the day of first sale. How long a firm obtains interest-free financing from suppliers in the form of accounts payable and accrued expenses to help finance the asset cycle. The minimum level of current assets minus the minimum level of adjusted current liabilities. Current liabilities net of short-term bank credit and current maturities of long-term debt. Difference in total current assets and adjusted current liabilities. Not legally binding but represent a promise that the lender will advance credit. Legally binding even though no written agreement is signed. A commitment fee is charged for making credit available, regardless of whether the customer actually uses the line. The security consists of paper assets that presumably represent sales.