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Chapter 14 How does the seasonal nature of a firm's sales influence its decision regarding the amount of short-term credit to use in its financial

Chapter 14

  1. How does the seasonal nature of a firm's sales influence its decision regarding the amount of short-term credit to use in its financial structure.
  2. If long-term credit exposes a borrower to less risk, why would people or firms ever borrow on a short-term basis?
  3. On average, which group of borrowers would have to pay a higher effective rate for its short-term loans, those who are required to put up collateral or those who are not? Explain.
  4. What type of inventory make "good" collateral?

Chapter 15

  1. What are the principle reasons for holding cash? What is a cash budget? For what purposes should cash budgets be created?
  2. In general, does a firm wish to speed up or slow down collections of payments made by its customers? How does the same firm wish to manage its disbursement? Why?
  3. Firm A's management is very conservative, whereas Firm B's is more aggressive. Is it true that, other things the same, Firm B would probably have larger holdings of marketable securities? Explain.
  4. Describe the three classifications of inventory and indicate the purpose for holding each type.

Chapter 16

  1. What data are necessary to construct an operation breakeven chart? What data are necessary to construct a financial breakeven chart?
  2. What benefits can be derived from breakeven analysis, both operating and financial? What are some problems with breakeven analysis?

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