CH09+questions - Chapter 9 Short-term debt 1. Briefly...

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Chapter 9 Short-term debt 1. Briefly discuss the term differences between short-term and medium- to long-term debt finance. Are these distinctions useful? 2. Explain the operation of trade credit, and calculate the opportunity cost of an invoice that provides for payment in thirty days’ time, or a 0.75 per cent per annum discount if the account is paid within seven days. 3. Businesses typically establish overdraft facilities that are provided by banks. Why is this form of debt facility so popular? In your answer, explain the purpose and operation of overdraft finance. 4. An overdraft facility allows a firm to manage its day-to-day liquidity position. In providing an overdraft to a business, identify and briefly discuss some of the liquidity- related issues that a bank will analyse before granting an overdraft. 5. As a lending manager with Mega Bank, you have been asked by a corporate client to explain commercial bill financing. Describe the structure of a bank-accepted bill facility. Include in your answer definitions and explanations of the roles of the parties involved in the
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This note was uploaded on 03/26/2012 for the course FINS 2624 taught by Professor Hneryyip during the Three '10 term at University of New South Wales.

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CH09+questions - Chapter 9 Short-term debt 1. Briefly...

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