04 Which is most correct? If a firm is offered credit terms of 2/10, net 30, it is in the firm's financial interest to pay as early during the discount period as possible. A company with the effective) opportunity cost of not taking a cash discount equal to 9% per year should borrow money to pay early to obtain the cash discount if the loan's (effective) interest rate is 10% per year. Trade credit may not be costless when a cash discount is offered Other things held constant, the calculated cost of trade credit for a firm that buys on terms of 1/10, net 15, is lower if the firm pays on day 14 rather than day 15. * Trade credit is rarely used by firms because of its relatively expensive cost and is, therefore, an unimportant component of short-term debt for most firms. 06 Which is most correct regarding the bills of exchange (BES) issued by TPI Polene Power below? TPIPP21108A : Bill of Exchange of TPI POLENE POWER PUBLIC COMPANY LIMITED NO.TPIPP63/003 Amount THB 40 min. due January 8, 2021 (TPIPP21108A) Symbol TPIPP21108 Registration Date 14 July 2020 TPI POLENE POWER PUBLIC COMPANY LIMITED Issuer Name (Thai) ISIN Code (Local) 0 Put/Call Option Collateral ISIN Code 0 Bond Type Senior Hidden information At Maturity Actual/365 Initial Par THB 1,000,0000 Current Par THB 1.000.0000 Payment Frequency Calculation Method Issue Term (Year) Issue Date Maturity Date 0.5 Yrs. Issue Size THB 40.00 min 14 July 2020 8 January 2021 Outstanding Size THB 40.00 min Private Placement Distribution Prospectus The BEs exemplifies trade credit In the case of bankruptcy, the holders of the BEs have claims on the issuer's pledged assets > Among all creditors of the issuer, the holders of the Bes have the last claims on the issuer's cash flow. It is more likely that the interest cost of the BEs is lower than that of a THB40 million short- term loan from a bank with promissory notes, The BEs were sold primarily to investors in the public. 07 Which is INCORRECT? Minimum accounts receivable are an example of a permanent working capital. Cash is always a permanent asset as firms must hold it all the times for day-to-day transactions * Other things constant, among the three financing policies, the aggressive financing approach yields the highest expected rate of return to firms as its financing costs are the least expensive. Risk arising from maturity gaps may not be eliminated completely even if firms raise funds following the maturity-matching financing policy. > Working capital is current assets that could be financed by short-term funds. 08 Based on each financing approach, which choice exemplifies the correct choice of funds to support a safety stock? Conservative Aggressive Self-liquidating 0 270-day bills of exchange A short-term loan Common shares 2 Common shares A long-term loan Retained earnings A long-term loan A 6-month OD 270-day bills of exchange A long-term loan Retained earnings Accounts payable (5) Debentures Accrued expenses A 6-month OD