Unit 3: Long Term and Short Term Sources of Funds

A line of credit would be considered __________.

a short-term loan needed for working capital an agreement to borrow up to a specific total amount on demand from a bank

A letter of credit would be considered __________.

an agreement that one party's payment will be received an agreement to borrow up to a specific total amount on demand from a bank a short-term loan a short-term loan

Apex has made a large sale with a foreign firm. It wants to deliver the product; however, it is concerned they will not be paid in full. Apex should request a letter of ___________ from its customer to ensure it will be paid

credit

If Apex chooses to preserve a fixed debt-equity ratio, it can raise the additional funds by __________.

issuing preferred stock while calling in bonds issuing stock while lowering dividends

Apex has a great deal of its own stock; however, it needs to sell some to raise capital for a short-term expense. The company could use a ________ agreement with the stock to borrow capital for a short period

repurchase

Which of the following is most long-term financing used for?

New physical plant New large projects

If Apex chooses to use equity funding for its next product, what should it take into consideration?

Equity funding is less risky from a cash flow perspective Equity funding is more expensive then debt funding Debt funding is tax-deductible