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Kindly Answer these questions for me. Thanks Flow of Funds exercise This continuing exercise focuses on the interactions of a single manufacturing firm (Carson Company)
Kindly Answer these questions for me. Thanks
Flow of Funds exercise This continuing exercise focuses on the interactions of a single manufacturing firm (Carson Company) in the financial markets. It illustrates how financial markets and institutions are integrated and facilitate the flow of funds in the business and financial environment. At the end of every chapter, this exercise provides a list of questions about Carson Company that requires the application of concepts presented in the chapter as they relate to the flow of funds. Carson Company is a large manufacturing fim in California that was created 20 years ago by the Carson family. It was initially financed with an equity investment by the Carson family and 10 other individuals. Over time, Carson Company obtained substantial loans from finance companies and commercial banks. The interest rates on those loans are tied to market interest rates and are adjusted every six months. Thus, Carson's cost of obtaining funds is sensitive to interest rate movements. The company has a credit line with a bank in case it suddenly needs additional funds for a temporary period. It has purchased Treasury securities that it could sell if it experiences any liquidity problems. Carson Company has assets valued at approximately $50 million and generates sales of nearly $100 million per year. Some of its growth is attributed to its acquisitions of other firms. Because it expects the U.S. economy to be strong in the future, Carson plans to grow by expanding its business and by making more acquisitions. It expects that it will need substantial long-term financing and plans to borrow additional funds either through obtaining loans or by issuing bonds. It is also considering issuing stock to raise funds in the next year. Carson closely monitors conditions in financial markets that could affect its cash inflows and cash outflows and thereby affect its value. Questions 1) In what way is Carson a surplus unit? 2) In what way is Carson a deficit unit? 3) How might finance companies facilitate Carson's expansion? 4) How might commercial banks facilitate Carson's expansion? 5) Why might Carson have limited access to additional debt financing during its growth phase Step by Step Solution
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