8. You work in the finance department of a manufacturing company. Over lunch, a friend in the engineering department said she’d heard that the firm used a lot of temporary working capital. Because temporary equipment is usually of lower quality than permanent material, she wonders why the company, which is quite prosperous, doesn’t buy the best and store it when it isn’t needed.

What misconceptions does your friend have? Write a brief explanation for someone who knows nothing about finance to straighten out her understanding.