Question 1a

What is liquidity a measure of? Discuss the potential merits of high liquidity verses low liquidity.

Question 1b You are reviewing the books of a firm you are considering purchasing and notice a considerable difference between the market value of some assets and the book value. Why might there be a difference?

Question 1c

If you consider purchasing a firm what is the firms enterprise value based on? (Hint: consider this in terms of the balance sheet entities).

Comment on the difference between enterprise value and market value.

Question 1d

What is the purpose of a firm? Express you response in terms of owners perspective.

Question 1e

A firm is engaging in a large capital project. It requires 100 Million Dollars for this project.

What options does the firm have to raise funds to finance this large capital project.