Problem
1. Explain how rapidly expanding sales can drain the cash resources of a firm.
2. Discuss the relative volatility of short- and long-term interest rates.
3. What is the significance to working capital management of matching sales and production?
4. How is a cash budget used to help manage current assets?
5. A firm that uses short-term financing methods for a portion of permanent current assets is assuming more risk but expects higher returns than a firm with a normal financing plan. Explain.
6. "The most appropriate financing pattern would be one in which asset buildup and length of financing terms is perfectly matched." Discuss the difficulty involved in achieving this financing pattern.