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Flashcards in Financial Decisions Deck (10):
1

What are the strategies of short-term financing?

Anticipate higher levels of temporary working capital that require greater agility & flexibility

2

What are the advantages of short-term financing?

Increased liquidity, Profitability, and decreased financing cost

3

What are the disadvantages of short-term financing?

Increased interest rate risk & credit risk

4

What are the advantages of long-term financing?

Decreased interest rate risk & credit risk

5

What are the disadvantages of long-term financing?

Decreased profitability, liquidity, and increased financing costs

6

What is required by vendors from the bank before they extend credit?

Letter of Credit

7

What protects value of debt by protecting credit rating on debtor?

Debt Covenants

8

Computation of expected value

Multiple the probability of the outcome by its value or profit

9

What type of bond maintains a constant market value?

Floating-rate bond

10

Calculation for economic rate of return on common stock

(Dividends + change in price) / beginning price