Question 1. Explain how rapidly expending sales can drain the cash resources of a firm.
Question 2: Discuss the relative volatility of short-and long-term interest rates.
Question 3: What is the significance to working capital management of matching sales and productions?
Question 4: How is a cash budget used to help manage current assets?
Question 5: "The most appropriate financing pattern would be one in which asst buildup and lengths of financing terms are perfectly matched". Discuss the difficulty involved in achieving this financing pattern.
Question 6: By using long-term financing to finance part of temporary current assets, a firm may have less risk but lower returns than a firm with a normal financing plan. Explain the significance of this statement.
Question 7: 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.
Question 8: What does the term structure of interest rates indicates?
Question 9: What are three theories for describing the shape of the term structure of interest rates (the yield curve)? Briefly describe each theory.
Question 10: Since the mid-1960s, corporate liquidity has been declining. What reasons can you give for this trend?