Discuss the hedging principles

Assignment Help Finance Basics

Reference no: EM131488883

Question: (Hedging principle) A popular theory for managing risk to the firm that arises out of its management of working capital (that is, current assets and current liabilities) involves following the principle of self-liquidating debt. How would this principle be applied in each of the following situations? Explain your responses to each alternative

a. Longleaf Homes owns a chain of senior housing complexes in the Seattle, Washington, area. The firm is presently debating whether it should borrow short or long term to raise $10 million in needed funds. The funds are to be used to expand the firm's care facilities, which are expected to last 20 years.

b. Arrow Chemicals needs $5 million to purchase inventory to support its growing sales volume. Arrow does not expect the need for additional inventory to diminish in the future.

c. Blocker Building Materials, Inc. is reviewing its plans for the coming year and expects that during the months of November through January it will need an additional $5 million to finance the seasonal expansion in inventories and receivables.

Reference no: EM131488883

Questions Cloud

Which economic sustainability considerations are covered : How was Walmart's sustainability index developed? Which social, ecological, and economic sustainability considerations are covered? Which ones are left out?

Compare the true brightness of the starts : Until the 19th century, it was impossible to compare the true brightness's of the starts because? The star with the brightest absolute magnitude in the list is

What types of energy or fuel did you use : What types of energy or fuel did you use (including any renewable sources of energy, such as wind, hydroelectric, solar, etc.)?

Unintentional injuries in the home : Two investigators were interested in testing the hypothesis that high educational attainment is associated with more frequent unintentional injuries in the home

Discuss the hedging principles : (Hedging principle) A popular theory for managing risk to the firm that arises out of its management of working capital.

Federal district court in illinois exercise jurisdiction : 1. On what basis might the federal district court in Illinois exercise jurisdiction in this case?

Calculate number of days of sales outstanding in receivables : (Cash conversion cycle) The data for Sharmtraiding Company across the last 6 years have been provided.

What are the concepts and actions you have learned : What are the concepts and actions you've learned that can be implemented in your current or future career? Is there any concept about sustainability?

Discuss the human and monetary and political costs of war : You can cite the material from the powerpoint but your discussion of the issue needs to be more in-depth than simply what is on the notes.

User Account

All Pages