Question: 1. What is meant by the following trade credit terms: 2/10, net 30? 4/20, net 60? 3/15, net 45?
2. Define the following:
a. Line of credit
b. Commercial paper
c. Compensating balance
d. Prime rate
3. (Risk-return trade-off) The balance sheet from 2011 to 2014 for Amaze Online Ltd., a consultancy firm, has been provided (figures in thousands):
a. Compute current and debt ratios for 4 years.
b. What is your opinion of the company's liquidity and leverage? (Leverage usually shows the share of liabilities in assets). Please note that in all 4 years, the company experienced an increase in net profit.
c. What conclusions can you draw from the company's financial decisions in the last year?