here is a common fallacy that industry observers held to guarantee Association:
How much cash you need to get on the bonds 1000000 $? The answer is not $ 1 million. Surprisingly, you only need a small portion of $ 1 million, but you need other elements as well. Let's dive in!
our readers may be familiar with the 3 C of the sponsorship Bond Offering: coercion, corruption, cowardice. In fact they are the characters, and the ability and money. This analysis describes the areas that are important to decision-makers bonds. Cash is located under the heading Capital. There are other important factors as well.
- includes
- Character credit rating of the applicant and the date of operation. The auditing of the draft customs law to pay along with references from suppliers and lenders. Assesses the letter if the request is likely provider to fulfill their obligations under the contract and bonds.
- capacity covers the skills of key people, the experience of the company in general, plant and equipment and other factors.
- Capital All financial resources, including cash.
includes
magic number
There is no magic number. When reviewing the insurance companies in the financial statement of the company it does not look in the cash position. In addition, they will assess the working capital, which includes cash plus accounts receivable, retainages financial and marketable securities, inventory, and other items. working capital consists of items that will become cash during the current financial period (accounting year). For example, the dollar benefits of "good" is the same as cash. up to this point, less pure cash is required.
finance new projects
one of the reasons Contractors working capital needs (WC) is to finance the start of new projects. You must mobilize the largest job site, and pay workers and buy materials - all from their own pockets at the outset. During the course of the project, and it begins itself to finance.
to hold bonds with $ 1000000 $ 1000000, it would take $ 1000000 to finance the start? No, it would just be a C and of $ 1,000,000.
second-answer segment
This leads us to the answer. Cash is one of the components of working capital, insurance companies expect Toilet equal to about 10% of the exposure bonded. This could mean that the $ 1000000 bond requires less than $ 100,000 in cash when combined with other components of capital factor. However, cash alone does not get approved bonds.
C. All three are equally important. Cash is not the only basis for this decision. It will continue to be cash-rich company rejected with bad credit or poor previous experience. Monetary can not overcome these disadvantages.
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