A firm that uses short-term financing methods for a portion of permanent current assets is assuming more

Question:

A firm that uses short-term financing methods for a portion of permanent current assets is assuming more risk but expects higher returns than a firm with a normal financing plan. Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Foundations of Financial Management

ISBN: 978-1259194078

15th edition

Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen

See More Books

Question Posted: Oct 14, 2014 07:13 AM

See More Questions

It appears that Allen can earn at least its current level of income for the indefinite future Based on this information the investors think that an appropriate investment capitalization rate for...
A firm that uses L, K, and Z as inputs has a technology with production function Which of the following statements is true? a. The firm's technology satisfies the Productive Inputs Principle and has...
Consider a firm that uses capital and labor as inputs and sells 5,000 units of output per year at the going market price of $10. Also assume that total labor costs to the firm are $45,000 annually....
On July 7, Splish Ltd. purchased 1,100 common shares in a privately-owned company named TWR Ltd. As the TWR shares were not traded on any stock exchange, Splish elected to account for the investment...
Suppose that f is continuous on [a, b] and that F(x) :=sup f ([a,x]). Prove that F is continuous on [a, b].
(a) A manufacturing company has been inspecting units of output from a process. Each product inspected is evaluated on five criteria. If the unit does not meet standards for the criteria, it counts...
Which of the following is not an example of a functional need? a. Physical warmth b. Food c. Shelter d. Love e. Water
In exercise 13, Bernie is given terms of 4/15 n/30, and he pays by day 15. a. How much will he pay the manufacturer for the order of 110 bikes? b. For how much will the manufacturer credit Bernies...
Ayayai decided to discontinue its entire wholesale division ( a major line of business ) and to keep its manufacturing division. On September 1 5 , it sold the wholesale division to Dylane Corp....
1. In terms of the eight contextual features in the change kaleidoscope (Figure 15.2), how receptive is the context for strategic change? 2. In the light of capability and readiness (Figure 15.3),...
What is the significance to working capital management of matching sales and production?
What are three theories for describing the shape of the term structure of interest rates (the yield curve)? Briefly describe each theory.
(Revenue Recognition) Nimble Health and Racquet Club (NHRC), which operates eight clubs mE in the Chicago metropolitan area, offers one-year memberships. The members may use any of the eight...
Consider a rigid body B with center of mass point B*. A set of coordinate axes is chosen centered at B* and defined by mutually orthogonal unit vectors 61, 62, 63 which are fixed in B. The rigid body...
Let A be the matrix 1 0 2 4 1 -6 = 7-4 7 -5 3 (a) (2 points) What must a and b be in order to define the linear transformation T: RR by T(x) = Ax. (b) (3 points) What is the image of the vector 2] 1...
write a title Understanding the roots of modern educational practices can provide valuable insights into their effectiveness and potential for improvement. One such root influencing contemporary...
State the limit for each of the following using the graph. -6. -5 + -3- 3 -2 -2 0 2 -2- w. 3 4
Great Eastern Credit Union (GECU) has two operating departments (Branches and Electronic) and three service departments (Processing, Administration, and Maintenance). During July, the following costs...
Suppose you want to hedge a $600 million bond portfolio with a duration of 6 years using 10-year Treasury note futures with a duration of 9 years, a futures price of 102, and 90 days to expiration....
Estimate a range for the optimal objective value for the following LPs: (a) Minimize z = 5x1 + 2x2 Subject to X1 - x2 3 2x1 + 3x2 5 X1, x2 0 (b) Maximize z = x1 + 5x2 + 3x3 Subject to X1 + 2x2 +...
The total energy $E$ of the electron cloud in an atom can be written as \[ E=K+V_{n e}+V_{e e}, \] where $K$ is the kinetic energy of the electrons, $V_{n e}$ the interaction energy between the...
Why is trend analysis helpful in analyzing ratios? What are the problems of trend analysis when different bases of accounting are applied to different years?
Hugh Snore Bedding has assets of $400,000 and turns over its assets 1.5 times per year. ROA is 12 percent. What is the firm's profit margin?
What effect will disinflation (after a high inflationary period) have on the reported income of the firm?Why might disinflation prove to be favourable to financial assets?
A company manufactures lawnmowers. Compute the total amount of period costs from thr following costs.
TestAnswerSavedHelp opens in a new windowSave & ExitSubmit Item 1 7 1 0 points Time Remaining 1 hour 2 0 minutes 1 8 seconds 0 1 : 2 0 : 1 8 Item 1 7 Time Remaining 1 hour 2 0 minutes 1 8 seconds 0 1...
Use the following information for the Problems below. (Algo) [The following information applies to the questions displayed below.] Lansing Company's current-year income statement and selected balance...

A firm that uses short-term financing methods for a portion of permanent current assets is assuming more

Question:

Step by Step Answer:

The by financing a portion of permanent current assets on a shortterm basis we run ...View the full answer

Foundations of Financial Management

Students also viewed these Corporate Finance questions