Private Placements of Debt Offer All but Which of the Following

question 6

Multiple Choice

Private placements of debt offer all but which of the following advantages?

• A) Variable interest rates
• B) Longer maturity times than most bank loans
• C) More willing to finance deals for fledgling small companies
• D) Actually, all of the above are advantages of private placements.

Understand the role and process of lockbox systems in improving cash management.

Identify the reasons for holding cash and the business activities it supports.

Assess the net float and its impact on a firm’s cash management.

Analyze the benefits and costs related to installing lockbox systems and using cash concentration accounts.

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Definitions:

Optimal Capital Structure

The most favorable blend of debt and equity financing that minimizes a company's cost of capital while maximizing its market value.

Stock Price

The current price at which a share of a company is traded on the stock market.

Optimal Capital Structures

The best mix of debt, equity, and other financial instruments that minimizes the cost of capital for a company while maximizing its value.

Financial Leverage

The use of borrowed funds to increase the potential return of an investment, which also increases the risk of loss.