Problem 1. In the management of cash and marketable securities, why should the primary concern be for safety and liquidity rather than maximization of profit?
Problem 2. Explain the similarities and differences of lockbox systems and regional collection offices.
Problem 3. Why would a financial manager want to slow disbursement?
Problem 4. Why are Treasury bills a favorite place for financial managers to invest excess cash?
Problem 5. Explain why the bad debt percentage or any other similar credit-control percentage is not the ultimate measure of success in the management of accounts receivable. What is the key consideration?
Problem 6. What are three quantitative measures that can be applied to the collection policy of the firm?
Problem 7. What are the 5 Cs of credit that are sometimes used by bankers and other to determine whether a potential loan will be repaid?
Problem 8. What does the EOQ formula tell us? What assumption is made about the usage rate for inventory?
Problem 9. Why might a firm keep a safety stock? What effect is it likely to have on carrying cost of inventory?
Problem 10. If a firm uses a just-in-time inventory system, what effect is that likely to have on the number and location of suppliers?
Problem 11. Under what circumstances would it be advisable to borrow money to take a cash discount?
Problem 12. Discuss the relative use of credit between large and small firms. Which group is generally in the net creditor position, and why?
Problem 13. How have new banking laws influenced competition?
Problem 14. What is the prime interest rate? How does the average bank customer fare in regard to the prime interest rate?
Problem 15. What does LIBOR mean? Is LIBOR normally higher or lower than the U.S. prime interest rate?
Problem 16. What advantages do compensating balances have for banks? Are the advantages to banks necessarily disadvantages to corporations?
Problem 17. A borrower is often confronted with a stated interest rate and an effective interest rate. What is the difference, and which one should be financial manager recognize as the true cost of borrowing?
Problem 18. Commercial paper may show up on corporate balance sheet as either a current asset or a current liability. Explain this statement.
Problem 19. What are the advantages of commercial paper in comparison with bank borrowing at the prime rate? What is a disadvantage?
Problem 20. What is the difference between pledging accounts receivable and factoring accounts receivable?