UNDERWRITING Definition

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UNDERWRITING is to protect by insurance or to guarantee the financial support of the subject item.

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DAYS PAYABLE OUTSTANDING (DPO) is an estimate of the length of time the company takes to pay its vendors after receiving inventory. If the firm receives favorable terms from suppliers, it has the net effect of providing the firm with free financing. If terms are reduced and the company is forced to pay at the time of receipt of goods, it reduces financing by the trade and increases the firms working capital requirements. It is calculated: Days Payable Outstanding = 365 / Payables Turnover (Payables Turnover = Purchases / Payables).

EXCHANGE RATE MECHANISM (ERM) is the precursor to the European Union's single currency (Euro) by which participating governments committed themselves to maintain the value of their currencies in relation to the European currency unit (Euro).

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