1. Define the hedging principle. How can this principle be used in the management of working capital?
2. There are three major sources of unsecured short-term credit other than accrued wages and taxes. List and discuss the distinguishing characteristics of each.
3. What is net working capital?
4. Calculate the effective cost of the following trade credit terms when payment is made on the net due date. Note assume a 30 day month and 360 day year. Use approximate cost of credit formula
a. 4/10, net 60
b. 3/15, net 30
c. 4/15, net 75
d. 2/10, net 45