10: Financial Management, Financial Options Flashcards
what is financial and capital structure
financial structure: includes all liability, current and non current and owners equity (all debt and equity)
capital structure: includes only non current liability and owners equity (all long term debt and equity)
what is pledging AR
receivable are used as collateral in a financing agreement with lender
what is factoring AR
receivables sold at discount for cash to a factor
what is Spontaneous financing
Spontaneous financing occurs automatically in the carrying out of day-to-day operations.
what is a compensating balance
Banks sometimes require (or expect) that a firm maintain a balance in a demand deposit account with the bank, in return for a line of credit or a loan (or for other services) provided by the ban
what is a revolving credit agreement
a formal legal commitment, usually by a bank, to extend credit up to some maximum amount to a borrower over a stated period.
what is a letter of credit
A letter of credit is a conditional commitment to pay a third party in accordance with specified terms. A revolving credit agreement is a formal legal commitment, usually by a bank, to extend credit up to some maximum amount to a borrower over a stated period.A letter of credit would be used to assure a foreign supplier of payment
what is a line of credit
A line of credit is an informal agreement whereby a lender agrees to extend a maximum amount of credit at any one time. A revolving credit agreement is a formal legal commitment, usually by a bank, to extend credit up to some maximum amount to a borrower over a stated period.
what is commercial paper
short term, unsecured promissory notes sold by large, highly creditworthy firms
what is a floating lien agreement
In a floating lien agreement, the inventory that serves as security for a borrowing is not placed under the control of an independent third party. In a floating lien agreement, the borrower retains the inventory, which it continuously sells and replaces.
what is a chattel mortgage agreement
In a chattel mortgage agreement, the inventory that serves as security for a borrowing is not placed under the control of an independent third party. In a chattel mortgage agreement, the borrower retains the inventory, but cannot sell it without the lender’s approval.
what is a field warehouse agreement
In a field warehouse agreement, the inventory that serves as security for a borrowing remains with the borrower, but is place under the control of an independent third party.
what is net lease and net net lease
Under a net lease, the lessee assumes the executory costs associated with the asset during the lease, including such elements as maintenance, taxes and insurance. In a net-net lease, the lessee assumes responsibility for the executory costs during the life of the lease, as well as for a residual value at the end of the lease.
what is an indenture
An indenture is the term given to a bond contract.
what is a debenture
A debenture is an unsecured bond.
