Questions from Financial Management

Q: Why does the typical firm need to make investments in working capital

Why does the typical firm need to make investments in working capital?

Q: Basically, what determines whether a bankrupt company is reorganized or liquidated

Basically, what determines whether a bankrupt company is reorganized or liquidated?

Q: Define and describe the difference between the operating cycle and cash conversion

Define and describe the difference between the operating cycle and cash conversion cycle for a typical manufacturing company.

Q: Discuss the probability versus risk trade-offs associated with alternative levels

Discuss the probability versus risk trade-offs associated with alternative levels of working capital investment.

Q: Describe the difference between permanent current assets and fluctuating current assets.

Describe the difference between permanent current assets and fluctuating current assets.

Q: Why is it possible for the effective cost of long-term

Why is it possible for the effective cost of long-term debt to exceed the cost of shortterm debt, even when short-term interest rates are higher than long-term rates?

Q: Describe the matching approach for meeting the financing needs of a company

Describe the matching approach for meeting the financing needs of a company. What is the primary difficulty in implementing this approach?

Q: Discuss the probability versus risk trade-offs associated with alternative combinations

Discuss the probability versus risk trade-offs associated with alternative combinations of short-term and long-term debt used in financing a company’s assets.

Q: As the difference between the costs of short- and long-

As the difference between the costs of short- and long-term debt becomes smaller, which financing plan, aggressive or conservative, becomes more attractive?

Q: Why is no single working capital investment and financing policy necessarily optimal

Why is no single working capital investment and financing policy necessarily optimal for all firms? What additional factors need to be considered in establishing a working capital policy?