Fin 571 Complete Week 3

FIN 571 Complete Week 3

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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?

FIN 571 Week 3 DQ 2 NEW

Managers must think not only in terms of a trade-off or a pecking order theories but remain concerned with how their financing decisions will influence the practical issues that they must deal with when managing a business.

Financial flexibility is an important consideration in many capital structure decisions. As you pointed out, managers must ensure that they retain sufficient financial resources in the firm to take advantage of unexpected opportunities as well as unforeseen problems. They try to manage their firms’ capital structures in a way that limits the risk to a reasonable level.

How can managers use leverage and control to support their capital structure decisions?

FIN 571 Week 3 DQ 3 NEW

Short term funding strategy involves various sources of short-term financing such as:

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...