1. What is float? What are its four basic components? Which of these components is the same from both a collection and a payment perspective?
2. What is a collection policy? What is the typical sequence of actions taken when by a firm when attempting to collect an overdue account?
strategic plan? Describe the roles that financial managers play with regard to
strategic planning.
4. What does the word sustainable mean in sustainable growth
model? In what ways can the sustainable growth model highlight conflicts
between a firm’s competing objectives?
5. What is the firm’s goal in short-term investing? How does
it use money market mutual funds? Describe some of the popular money market
financial instruments in each of the following groups: U.S. Treasuries, federal
agency issues, bank financial instruments, corporate obligations.
6. The owner of a hot dog cart purchases inventory with
credit every morning and sells all of the inventory by 2 o’clock in the
afternoon. The hot dogs an drinks are sold only for cash. Will the owner have a
negative cash conversion cycle?
7. Why does it make sense to let the firm’s cash balance or
a short-term liability account serve as the plug figure in pro forma
projections? Why not use gross fixed assets as the plug figure?
8. Why might pro forma statements and the equation for
external funds required (EFR) yield different projections for a firm’s financing
needs?
9. Explain how slower inventory turnovers, slower
receivables collections, or faster payments to suppliers would influence the
numbers produced by a cash budget.
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