公司理财PPT.ppt

sourcesofshort termfinancing 8 1 2 chapter8 outline sourcesofshort termfinancingtradecreditnetcreditpositiontypesofbankloanscorporateandforeignborrowingaccountsreceivablefinancinginventoryfinancinglonger termloans 1 3 sourcesofshort termfinancing therearevarioussourcesofshort termfundsavailabletoafirm tradecreditfromsuppliersbankloanscorporatepromissorynotesbankers acceptancesforeignborrowingloansagainstreceivablesandinventory 1 4 tradecredit approximately40percentofshort termfinancingisintheformofaccountspayableortradecreditaccountspayableisaspontaneoussourceoffundsgrowsasthebusinessexpandscontractswhenbusinessdeclines 1 5 paymentperiod tradecreditisusuallyextendedfor30 60daysextendingthepaymentperiodtoanunacceptableperiodresultsin alienatesuppliersdiminishedratingswithcreditbureausmajorvariableindeterminingthepaymentperiod thepossibleexistenceofacashdiscount 1 6 cashdiscountpolicy allowsreductioninpriceifpaymentismadewithinaspecifiedtimeperiodexample a2 10 net30cashdiscountmeans reductionof2 iffundsareremitted10daysafterbillingfailuretodosomeansfullpaymentofamountbythe30thday 1 7 net creditposition determinedbyexaminingthedifferencebetweenaccountsreceivableandaccountspayablepositiveifaccountsreceivableisgreaterthanaccountspayableandviceversalargerfirmstendtobenetprovidersoftradecredit relativelyhighreceivables smallerfirmsintherelativelyuserposition relativelyhighpayables 1 8 bankcredit provideself liquidatingloansuseoffundsensuresabuilt inorautomaticrepaymentschemechangesinthebankingsectortoday centeredaroundtheconceptof fullservicebanking expandedinternationallytoaccommodateworldtradeandinternationalcorporationsderegulationhascreatedgreatercompetitionamongotherfinancialinstitutions 1 9 primerateandlibor primeraterateabankchargestoitsmostcreditworthycustomersincreasesasacustomer screditriskincreaseslibor londoninterbankofferedrate rateofferedtocompanies havinganinternationalpresenceabilitytousethelondoneurodollarmarketforloans 1 10 primerateversusliboronu s dollardeposits 1 11 compensatingbalances afeechargedbythebankforservicesrenderedoranaverageminimumaccountbalancewheninterestratesarelower thecompensatingbalancerisesrequiredaccountbalancecomputedonthebasisof percentageofcustomerloansoutstandingpercentageofbankcommitmentstowardsfutureloanstoagivenaccount 1 12 maturityprovisions termloancreditisextendedforonetosevenyearsloanisusuallyrepaidinmonthlyorquarterlyinstallmentsonlysuperiorcreditapplicants qualifyinterestratefluctuateswithmarketconditionsinterestratemaybetiedtotheprimerateorlibor 1 13 costofcommercialbankfinancing effectiveinterestonaloanisbasedonthe loanamountdollarinterestpaidlengthoftheloanmethodofrepaymentdiscountedloan interestisdeductedinadvance effectiverateincreaseseffectiverate interest daysintheyear 360 principal interestdaysloanisoutstanding 1 14 interestcostswithcompensatingbalances assumingthat6 isthestatedannualrateandthat20 compensatingbalanceisrequired effectiveratewith interestcompensatingbalances 1 c 6 7 5 1 0 2 whendollaramountsareusedandthestatedrateisnotknown thefollowingcanbeusedforcomputation daysinaeffectiveratewith interest year 360 compensatingbalancesprincipal compensatingdaysloanisbalanceindollarsoutstanding 1 15 rateoninstallmentloans installmentloansrequireaseriesofequalpaymentsovertheperiodoftheloanfederallegislationprohibitsamisrepresentationofinterestrates howeverthismaybemisused effectiverateoninstallmentloan 2 annualno ofpayments interest totalno ofpayments 1 principal 1 16 annualpercentagerate truthinlendingactof1968requirestheactualaprtobegiventotheborrowerannualpercentagerule protectsunwaryconsumerfrompayingmorethanthestatedraterequirestheuseoftheactuarialmethodofcompoundedinterestduringcomputationlendermustcalculateinterestfortheperiodontheoutstandingloanbalanceatthebeginningoftheperioditisbasedontheassumptionsofamortization 1 17 thecreditcrunchphenomenon thefederalreservetightensthegrowthinthemoneysupplytocombatinflation theaffect decreaseinfundstobelentandanincreaseininterestratesincreaseindemandforfundstocarryinflation ladeninventoryandreceivablesmassivewithdrawalsofsavingsdepositsatbankingandthriftinstitutions fuelledbythesearchforhigherreturnscreditconditionscanchangedramaticallyandsuddenlydueto unexpecteddefaultseconomicrecessionschangesinmonetarypolicyothereconomicsetbacks 1 18 financingthroughcommercialpaper short term unsecuredpromissorynotesissuedtothepublicfinancepaper directpaperdealerpaperasset backedcommercialpaperbook entrytransactionscomputerizedhandlingofcommercialpaper wherenoactualcertificateiscreated 1 19 totalcommercialpaperoutstanding 1 20 advantagesofcommercialpaper maybeissuedatbelowtheprimeinterestratenoassociatedcompensatingbalancerequirementsassociatedprestigeforthefirmtofloattheirpaperinanelitemarket 1 21 disadvantagesofcommercialpaper manylendershavebecomerisk aversepostamultitudeofbankruptciesfirmswithdowngradedcreditratingdonothaveaccesstothismarketthefundsgenerationassociatedwiththisislesspredictablelacksthedegreeofcommitmentandloyaltyassociatedwithbankloans 1 22 foreignborrowing eurodollarloandenominatedindollarsandmadebyforeignbankholdingdollardepositsshort termtointermediatetermsinmaturityliboristhebaseinterestpaidonloansforcompaniesofthehighestqualityoneapproach borrowfrominternationalbanksinforeigncurrencyborrowingfirmmaysuffercurrencyrisk 1 23 useofcollateralinshort termfinancing securedcreditarrangementwhen creditratingoftheborroweristoolowneedforfundsisveryhighprimaryconcern whethertheborrowercangenerateenoughcashflowtoliquidatetheloanwhendueuniformcommercialcodestandardizesandsimplifiestheproceduresforestablishingsecurityagainstaloan 1 24 accountsreceivablefinancing includes pledgingaccountsreceivablesfactoringoranoutrightsaleofreceivablesadvantage permitsborrowingtobetieddirectlytothelevelofassetexpansionatanypointoftimedisadvantage relativelyexpensivemethodofacquiringfunds 1 25 pledgingaccountsreceivables lendingfirmdecidesonthereceivablesthatitwilluseasacollateralloanpercentagedependsonthefirms thefinancialstrengththecreditworthinessinterestrateiswellabovetheprimeratecomputedagainstthebalanceoutstanding 1 26 factoringreceivables receivablesaresoldoutrighttothefinancecompanyfactoringfirmsdonothaverecourseagainstthesellerofthereceivablesfinancecompaniesmaydoallorpartofthecreditanalysistoensurethequalityoftheaccountsfactoringfirmis absorbingrisk forwhichafeeiscollectedactuallyadvancingfundstotheseller paidalendingrate 1 27 factoringreceivables example if 100 000amonthisprocessedata1 commission anda12 annualborrowingrate thetotaleffectivecostiscomputedonanannualbasis1 commission1 interestforonemonth 12 annual 12 2 totalfeemonthly2 monthlyx12 24 annualratetheratemaynotbeconsideredhighduetofactorsofrisktransfer aswellasearlyreceiptoffundsitalsoallowsthefirmtopassonmuchofthecredit checkingcosttothefactor 1 28 assetbackedpublicoffering thereisanincreasingtrendinpublicofferingsofsecuritybackedbyreceivablesascollateralinterestpaidtotheownersistaxfreeadvantagestothefirm immediatecashflowhighcreditratingofaaorbetterprovidescorporateliquidityshort termfinancingdisadvantagetothebuyer riskassociated receivablesactuallybeingpaid 1 29 inventoryfinancing factorsinfluencinguseofinventory marketabilityofthepledgedgoodsassociatedpricestabilityperishabilityoftheproductdegreeofphysicalcontrolthatthelendercanexerciseovertheproduct 1 30 stagesofproduction stagesofproductionrawmaterialsandfinishedgoodsusuallyprovidethebestcollateralgoodsinprocessmayqualifyonlyasmallpercentageoftheloan 1 31 natureoflendercontrol providesgreaterassurancetothelenderbuthigheradministrativecoststypesofarrangements blanketinventorylienslenderhasageneralclaimagainstinventorytrustreceipts floorplanning aninstrument theproceedsfromsalesgotothelenderwarehousingareceiptissue goodscanbemovedonlywiththelender sapprovalpublicwarehousingfieldwarehousing 1 32 hedgingtoreduceborrowingrisk engaginginatransactionthatpartiallyorfullyreducesapriorriskexposurethefinancialfuturesmarke