Toxic Assets - There are no Buyers, and as a Result, No Clear Value. I. E. During recent Financial Crisis, Mortgage Backed Securities and Subprime Loans are Examples.
What is the most extreme of illiquid assets
100
Too Much of a Good Thing Can be Interpreted as Poor Management
What is Excessive Cash or Liquidity
200
The Ratio of a Company's Total Cash and Cash Equivalents to its Current Liabilities.
What is Cash Ratio
200
Bank Gives Company More Time but Does Not Lend Additional Money Needed
What is Possible Bank Action Plan
200
Something that Cannot easily be Sold or Exchanged for Cash without a Substantial Loss in Value.
What is an Illiquid Asset
200
Illiquid
What Type of Asset is an Original Picasso
200
Positive Stage of Company Lifecycle Most Likely to Consume Liquidity
What is start-up/rapidly growing company
300
Accounts Receivable/Credit Sales/365 = # Days
What is Average Collection Period
300
Bank Lends Additional Money and Does Not Call the Loan
What is Possible Bank Action Plan
300
Metric that Expresses the Length of Time, in Days, that it Takes for a Company to Convert Resource Inputs into Cash Flows
What is Cash Conversion Cycle
300
It is illiquid
What is problematic with the private company equity of many borrowers
300
Walmart or another Big Box Store
What company would you think could have a negative Cash Conversion Cycle - for instance, if the company has a strong market position and can dictate purchasing terms to suppliers (i.e. can postpone its payments)
400
Financial Ratio Analysis
What is Incomplete Without Peer Comparison
400
A Tool to Mitigate the Risk that Bank's Actions During the Period Following a Default when They are Looking at Their Options Results in an Unintentional Loss of the Rights Otherwise Available to Them Under the Loan Agreement
What is a Reservation of Rights Letter
400
Free Cash Flow Shows Difference Between Cash Flow from Operations and Cash Flow from Investments - i.e. Equity or Debt. Remember our Discussion of the Enron Scandal.
Free Cash Flow Can be Defined as the Difference Between...
400
Regulators
A problem loan increases scrutiny by
400
Increasing Accruals
What is a Source of Liquidity
500
Cost of Goods Sold / Average or Current Period Inventory
What is Inventory Turnover Ratio
500
A Contract that Obligates a Lender to Refrain From Enforcing Existing or Anticipated Defaults for a Short Time Period in Consideration of New Agreements by a Borrower.
What is a Forbearance Agreement
500
DIO + DSO – DPO
Cash Conversion Cycle
500
Banks/Investors Demand a Term Premium for Long Term Loans/Investments
What is a Term Liquidity Premium
500
Renders Federal Reserve Monetary Policy Ineffective