Chapter 13 notes.docx - Working capital current assets the...

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Working capital - current assets - the owner may go into debt (current liabilities) current assets – current liabilities = net working capital maturity matching approach: match the maturities of current assets with the current liabilities layered financing: using a combination of source for acquiring cash 7 sources of acquiring cash: 1. bank lending a. the interest paid will be based on the prime rate: interest rate that’s paid for borrowing money. b. Involved a line of credit: loan limit established by the bank 2. Trade credit a. Credit given by suppliers b. Repayment occurs within 30 to 60 days c. Involves a trade discount: reduce payoff for early payment 3. Commercial finance companies: companies who don’t have a bank charter but provides loans 4. Commercial paper a. Short-term promissionary notes that’s sold by high-credit worthy companies b. Matures within 270 days 5. Secured (asset-based) lending: a. Borrowing money by using assets as collaterals b.
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