You and the vice president of accounting will be meeting with the chief financial officer (CFO) to discuss critical areas of the operating budget for next year, as well as the capital budget.
The following issues are of a particular concern to the CFO:
- The company's working capital position
- The impact of some short-term notes that the company must pay off next year
- The company's current ratio
- Determining how to finance a major capital project (construction of a new production plant)
You and the vice president of accounting are meeting in preparation for the meeting with the CFO. Provide examples for and discuss the following topics:
- How working capital can impact a company's finances
- What the company can do to handle short-term debt that is coming due
- The current ratio, its implications, and what a good current ratio would be
- How businesses make capital budgeting decisions