Possibility of performance
Yet another essential feature of a valid contract is that it must be capable of performance. Section 56 lays down that “An agreement to do…
Possibility of performance
Not expressly declared void
The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly…
Why does hedging reduce risk?
Hedging is the balancing of a risky position with an equal and opposite risky position. Effectively, hedging creates a portfolio of risky positions in which…
What is the difference between hedging across the balance sheet and hedging individual cash flows?
The difference is in which risky positions are balanced out. Hedging across the balance sheet matches assets and liabilities by their maturities to ensure that…
What are the four steps in putting working capital on the balance sheet?
he four steps represent a logical way to think about filling out the balance sheet in order to (1) only accept investments with positive NPV,…
Attractive short-term financing opportunities
Why are the “attractive short-term financing opportunities,” described in the second step of the four-step process, considered before other debt financing? These opportunities are considered…
How is the current ratio used in setting the debt maturity mix?
How is the current ratio used in setting the debt maturity mix? Can you think of any other financial measures that could also be used…
Debt maturity mix
What role does the debt maturity mix play in the firm’s overall risk-return posture? The debt maturity mix is an important input to a company’s…
Why is the debt maturity mix normally simplified to short- vs. long-term debt?
Why is the debt maturity mix normally simplified to short- vs. long-term debt? What, if anything, is lost in making this simplification? This simplification is…
What role do permanent current assets play in maturity-range hedging?
Even though individual current assets turn over within the annual accounting period, the balance of permanent current assets has a long-term maturity since it will…