Business Administration - Accounting & Financial Planning FIN401 Lecture Notes - Lecture 8: Lock Box, Credit Analysis, Promissory Note
20 Jan 2018
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Chapters 7 & 8: reasons for holding cash, cash management, float, lock box, accts receivable mgt, credit analysis, cost benefit analysis, factoring. Inventory mgt chap 7- nov 21: short term financing options, effective int rates. Chapter 8 - outline: cost of financing alternatives, sources of short-term financing, hedging to reduce borrowing risk, summary and conclusions. Characterize trade credit as an important form of short-term financing and calculate its cost to the firm if a discount is forgone (lo1) Describe bank loans as self-liquidating, as short-term, and as having their interest cost tied to the prime rate. Also, calculate interest rates under differing conditions. (lo2) Describe commercial paper as a short-term, unsecured promissory note of the firm. (lo3) Review borrowing in foreign markets as cost-effective alternative for the firm. (lo4) Explain that offering accounts receivable and inventory as collateral may lower the interest costs on a loan. (lo5) Demonstrate the hedging of interest rates to reduce borrowing risk. (lo6)
