Working Capital Loans

Question 1

PWC Analysis: PWC Fromula

Answer 1

Determine the point that AR, Inv, and Payables Stabilize then, AR + AP- Inv. = PWC.

Question 2

Working Capital is

Answer 2

the layer of capital used exclusively for day-to-day operations.

Question 3

PWC

Answer 3

Is Layer fo Working Captial that month after month never goes away, should be regard as part of long-term capital structure.

Question 4

When A seasonal loan can’t be repaid..

Answer 4

The company is a candidate for a permanent working captial loan.

Question 5

Repayment for working capitral loans

Answer 5

Borrower’s ability to generat enough cash flow to repay the loan.

Question 6

PWC: Collateral

Answer 6

Min AR and Inv.

If relance on Inv. is high then Plant and Equipment

Question 7

PWC: Borrowing Base Advantages

Answer 7

Limits risk that the bank lend against collateral that can’t be sold or AR that can’t be collected
Protects against the diversion of bank funds
Requires the borrower to be disciplined about managing working capital

Question 8

Disadvantages of Borrowing Base

Answer 8

Advance rate may mean the borrower does not qualify for full funding
Borrowing Base is expensive to administer costs are passed on to the customer

Question 9

Term Loans for PWC

Answer 9

AR and Inv. as a minimum for collateral, but usually rely more on fixed assets
May want to consider whether to block payment of dividends, or coverage raios

Question 10

Asset Based Loan

Answer 10

AR and Inv. as collateral. Usually one to three years Daily reporting and investigation by bank’s examiners.

Question 11

Adjusted Working Capital Adjusted Current Assets

Answer 11

Current Assets minus cash

Question 12

Adj Working Capital - Adjusted Current Liabilities

Answer 12

Subtract notes payable and CPLTD

Question 13

Adjusted Working Capital

Answer 13

Adjusted Current Assets - Adjusted Current Liabilities