3 and 4

term structure of interest rates (yield curve) 173 DISCUSSION QUESTIONS I. Explain how rapidly expanding sales can drain the cash resources of a firm. (LO6-3) Discuss the relative volatility of short- and long-term interest rates. (LO6-4) What is the significance to working capital management of matching sales and production? (LO6-3) How is a cash budget used to help manage current assets? (L06-1) "The most appropriate financing pattern would be one in which asset buildup and length of financing terms are perfect Discuss the difficulty involved in achieving this financing patte ( 05) By using long-term financing to finance part of temporary current assets, a firm may have less risk but lower returns than a firm with a normal financing plan Explain the significance of this statement. (L06-5) 2. 3. 4. 5. 6. 7. A firm that uses short-term financing methods for a portion of permanent cur rent assets is assuming more risk but expects higher returns than a firm with a normal financing plan. Explain. (LO6-3) 8. What does the term tr t intarest wates indicate2 (106 4)