Question

in you own words

1.-Working Capital -How does management mnage working capital and what is the benefit of managing working capital?

2.- Effective financing rate-What is meant by determining the effective financing rate?

3.-Letter of Credits- What is a letter of credit and what is the benefit when conducting business internationally?

Answer 1

1)Managing work capital is essential for growth of a company. It will enhance the company profitability and liquidity. Working capital is difference between company current assets and current liabilities. It tells how well company is performing in inventory management, receivable management and payables management

b)Effective financing rate tells what is the actual financing rate the company is facing

r=[(1+(i/n))^n]-1

Here i=interest rate

n=no of compounding periods

c)Letter of credit is one issued by a bank to other bank to serve as guarantee and to get the loan for payment to be made under terms and conditions. This gives the company easy to get money for business and pay money once they receive money from supplier