boken kap 26 del 3 Flashcards
What are shortage costs?
Costs that fall with increases in current asset investments (trading/order costs, safety reserves).
What is the optimal balance of current assets?
The point where total costs are minimized.
In an ideal world, what is the net working capital?
Zero, meaning short-term assets are financed with short-term debt.
What is Strategy F for financing current assets?
Maintaining a short-term cash surplus with large investments in cash and marketable securities.
What is Strategy R for financing current assets?
Using long-term financing for secular needs and short-term borrowing for seasonal variations.
What are key considerations for determining the amount of short-term borrowing?
Cash reserves, maturity hedging, and the term structure of interest rates.
What is a cash budget?
A primary tool for short-term financial planning that helps determine required short-term borrowing.
What are the four basic categories of cash outflows?
- Payments of accounts payable,
- wages/taxes/expenses,
- capital expenditures,
- long-term financing (interest, dividends).
How can a firm finance a temporary cash deficit?
Through unsecured or secured loans.
What are unsecured loans?
Loans without collateral, such as non-committed or committed lines of credit.
What is the difference between non-committed and committed lines of credit?
Non-committed allows borrowing up to a specified limit without a formal agreement, while committed involves a formal legal arrangement.
What are secured loans?
Loans backed by collateral.
