What are the two principal reasons for holding cash? Can a firm estimate its tar

Question

What are the two principal reasons for holding cash? Can a firm estimate its target cash balance held to satisify each of the two reasons

What are the four elements of a firm's credit policy? To what extent can firms set their own credit policies as opposed to accepting policies that are dictated by its competitors?


From, the standpoint of the borrower, is long-term or short-term credit riskier? Please explain.

What are the advantages of matching the maturities of assets and liabilities? What are the disadvantages?

Explanation / Answer

The two pricipal reasons for holding a cash is 1. To meet the short-term requirements 2. For maintain the liquidity. Yes the firm can estimate its target cash balance held to satisify each of the two reasons. Four elements of credit policy: 1. Consistency and Credibility 2. Dealing with Debtors 3. Practices Within the Policy
4. Enforcing the Policy
   In the following case firms set their own credit policies. 1.the seller’s strength in the market 2.the capital needed to finance seller’s sales 3.the credit terms which the seller gets from his own suppliers From the borrower pont of view the long-term credit is more risky. Because for long-term the interest rates are fixed and more maturity. Advantages of matching the maturities of assets and liabillities: 1. To know the duration of income stream 2. To know the consistency Disadvantages: It is risky if changing interest rates From the borrower pont of view the long-term credit is more risky. Because for long-term the interest rates are fixed and more maturity. Advantages of matching the maturities of assets and liabillities: 1. To know the duration of income stream 2. To know the consistency Disadvantages: It is risky if changing interest rates

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.