Suppose that at year-end 1999 Executive Paper had unused lines of credit that would have allowed it
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Suppose that at year-end 1999 Executive Paper had unused lines of credit that would have allowed it to borrow a further $300 million. Suppose also that it used this line of credit to raise short-term loans of $300 million and invested the proceeds in marketable securities. Would the company have appeared to be?
(a) More or less liquid?
(b) More or less highly levered? Calculate the appropriate ratios.
Line of CreditA line of credit (LOC) is a preset borrowing limit that can be used at any time. The borrower can take money out as needed until the limit is reached, and as money is repaid, it can be borrowed again in the case of an open line of credit. A LOC is...
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Related Book For
Principles of Corporate Finance
ISBN: 978-0072869460
7th edition
Authors: Richard A. Brealey, Stewart C. Myers
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