Question 1: Briefly explain how each of the following can be used to reduce a firm's float costs:
(a) wire transfers;
(b) zero balance accounts (ZBAs);
(c) controlled disbursing;
(d) centralized processing of payables;
(e) lockboxes.
Question 2: What causes the differences between available balances and book balances?
Question 3: Why do investors require firms issuing commercial paper to be of high creditworthiness?
Question 4: Why are interest rates on short-term loans not necessarily comparable to each other? Give three possible reasons.
Question 5: Explain how agency costs, created by market imperfections, can lead to the use of trade credit.
Question 6: Explain how a firm's inventory and accounts receivable management problems are like a capital budgeting problem.
Question 7: What benefits and costs should be analyzed when deciding the proper safety stock level?
Question 8: How does a just-in-time inventory system benefit a firm? What conditions are needed for its successful use?