Question

How will the following events affect the size of the company's optimal investment in current assets? to.

1. Interest rates rise from 5.5% to 7.5%.

2. Just-in-time stocks are introduced, reducing the risk of stock shortages

3. Customers pressure the company to adopt a softer credit sales policy.

Answer 1

1.

Debt D	Equity E	D/E Ratio	Ke	105.50%	107.50%	Difference Of 7.5% increase and debt
0	2000	-	6.50	2110	2150	2150
100	1500	0.07	6.57	1582.5	1612.5	1512.5
200	1000	0.20	6.82	1055	1075	875
300	900	0.33	7.32	949.5	967.5	667.5
855	890	0.96	31.75	938.95	956.75	101.75

It should be noted that the costs are slightly higher than Ku's costs, taking into account that Ku is the cost of the investor, as if the company were indivisible.

 

If there is an obligation - KeValue - Ke is, in principle, more remarkable than Cu, due to influence. With these qualities, it is possible to define the company as an incentive for each period.

 

Therefore increase interest rate will encourage the company to invest more on its assets to gain more returns via value added by rates as shown by the graph above (STEVEN & JAIME , 2017). For example, in most cases, banks should be able to adapt to problem solving in situations of limited duration, but that the ICPF would not do it well. Banks may attempt different changes according to performance protection at low rates, although ICPFs are portrayed as negative loopholes that make them defenseless against lower financing costs. However, when the interest rate increases they tend to be indifferent and invest more on their financial assets.

 

2.

Just in time is essential in Inventory management, also known as inventory control, is used to show how much stock you have at the same time and how you can monitor it.

 

This applies to everything you use to deliver or manage a product, from raw materials to finished products. It includes your inventory at every stage of the creation process, from purchase and transfer to inventory usage and reclassification.

 

Effective inventory management allows you to get the perfect amount of inventory in the right place at the right time (Christopher , George , & Daniel , 2016). This ensures that the capital is not unusable and ensures stocking in the event of stock network problems.

 

This guide explains the different inventory management strategies, shows you the best way to create them and shows you where to find more data and enables you to make proper decision for investment thereafter.

 

3.

Capital markets associated with state creation are important because they are not complicated. Besides some stock market transactions and government-selected auditors, there are not many reliable middle-level people, such as FICO valuation organizations, speculation researchers, freight forwarders or financial firms. Multinational companies cannot rely on local liabilities or higher capital values to support their operations. Like financial experts, credit managers do not address precise data about organizations. Organizations can only make significant efforts to investigate the financial sustainability of different companies or to collect receivables after they have lent to customers (Colin & Ross , 2014). Business management is also very poor in developing countries. As a result, multinational organizations cannot rely on their employees to comply with laws and agreements on joint efforts. Because private companies thrive in the nation-building process, multinational companies cannot expect that the only purpose of benefiting is to drive their neighboring businesses.

101.75