Q2. When offering loans to small firm, the lenders normally will require the company share of the small firm as a collateral of the loan. That means, if the firm defaults in the payment of loan, the share ownership of the small firm will be transferred to the lender. Explain the reasons for the lender in setting this requirement. Also illustrate the advantages it may have if the ownership of the firm is in the form of corporation.

Q3. One day, the CEO of your firm talks to you that he wants to reduce the amount of current assets because he feels that these assets generate little return to the company. Suppose you are the CFO of the company, how would you respond to CEOs comment?