EBK CORPORATE FINANCE
4th Edition
ISBN: 8220103164535
Author: DeMarzo
Publisher: PEARSON
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Chapter 27, Problem 5P
Summary Introduction
To discuss: The reason behind the companies choosing to finance the permanent working capital with short-term debt.
Introduction:
Permanent working capital is one of the types of working capital where the firm has to invest in short-term assets; this helps the firm in continuous operations. The matching concepts state that the firm must finance this type of working capital investment with long-term sources of funds. This is because this source will have low transaction cost compared to the short term sources of funds.
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Students have asked these similar questions
Which of the following is not a financing activity?*
Repayment of long-term debt
Issuance of equity
Investments in businesses
Payment of dividends
The correct order of capital stack from the most to least secured is*
Equity > Subordinated debt > Senior debt
Suborindated debt > Senior debt > Equity
Senior debt > Subordinated debt > Equity
Senior debt > Equity > Subordinated debt
16. ____ underwriting commitment is when the underwriter agrees to buy the entire issue and assume full financial responsibility for any unsold shares.*
Best efforts
Firm commitment
All-or-none
Full-purchase
Chapter 27 Solutions
EBK CORPORATE FINANCE
Ch. 27.1 - Prob. 1CCCh. 27.1 - What is the effect of seasonalities on short-term...Ch. 27.2 - Prob. 1CCCh. 27.2 - What is the difference between temporary and...Ch. 27.3 - Prob. 1CCCh. 27.3 - Describe common loan stipulations and fees.Ch. 27.4 - What is commercial paper?Ch. 27.4 - How is interest paid on commercial paper?Ch. 27.5 - Prob. 1CCCh. 27.5 - What is the difference between a floating lien and...
Ch. 27 - Prob. 1PCh. 27 - Sailboats Etc. is a retail company specializing in...Ch. 27 - What is the difference between permanent working...Ch. 27 - Quarterly working capital levels for your firm for...Ch. 27 - Prob. 5PCh. 27 - Prob. 6PCh. 27 - Prob. 7PCh. 27 - Prob. 8PCh. 27 - Which of the following one-year 1000 bank loans...Ch. 27 - The Needy Corporation borrowed 10,000 from Bank...Ch. 27 - Prob. 11PCh. 27 - Prob. 12PCh. 27 - Prob. 13PCh. 27 - The Signet Corporation has issued four-month...Ch. 27 - Prob. 15PCh. 27 - Prob. 16PCh. 27 - Prob. 17PCh. 27 - Prob. 18P
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