http://www.fin571assignment.com/FIN-571NEW/FIN-571-Complete-Week-3-NEW
For more classes visit
www.fin571assignment.com
FIN 571 Complete Week 3 NEW
FIN 571 Week 3 DQ 1 NEW
The Long-Term funding strategy relies on long-term debt to finance both capital assets and working capital.
As a result, this strategy reduces risk since there is no need to consider refinancing assets since all funding
is long term.
How would a 'changing rate environment' impact the use of this strategy?
Accounts payable (trade credit), bank loans, and commercial paper are common sources of short-term
financing.
Accounts payable constituted about 35 percent of total current liabilities for all publicly traded
manufacturing firms. The buyer needs to figure out whether it makes financial sense to pay early and take
advantage of the discount or to wait and pay in full when the account is due.
Short-term bank loans accounted for about 20 percent of total current liabilities for all publicly traded
manufacturing firms. An informal line of credit is a verbal agreement between the firm and the bank, allowing
the firm to borrow up to an agreed-upon upper limit.
In exchange for providing the line of credit, a bank may require that the firm holds acompensating balance
with them.
What are some other sources of short-term financing used with this strategy?
Compare the financial ratios with each of the preceding three (3) years (e.g. 2014 with 2013; 2013
with 2012; and 2012 with 2011).
Compare the calculated financial ratios against the industry benchmarks for the industry of your
assigned company.
Inventory
$12,890
Accounts receivable
12,800
Accounts payable
12,670
Net sales
Cost of goods sold
$124,589
99,630
85 days
36 days
Payout and retention ratio: Tradewinds Corp. has revenues of $9,651,220, costs of $6,080,412, interest
payment of $511,233, and a tax rate of 34 percent. It paid dividends of $1,384,125 to shareholders. Find the
firm's dividend payout ratio and retention ratio.
25%, 75%
66%, 34%
34%, 66%
69%, 31%