Suppose that a firm finances its seasonal (temporary) current assets with long-term funds. What is the impact

Question:

Suppose that a firm finances its seasonal (temporary) current assets with long-term funds. What is the impact of this decision on the profitability and risk of this firm?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Fundamentals Of Financial Management

ISBN: 9780273713630

13th Revised Edition

Authors: James Van Horne, John Wachowicz

See More Books

Question Posted: Dec 07, 2015 05:41 AM

See More Questions

Suppose that a firm finds that its low-productivity workers have a marginal revenue product of $21,000 per year and that its high-productivity workers have a marginal revenue product of $35,000 per...
Suppose that a firm follows the matching strategy. Does this imply that the firms current assets will equal its current liabilities?
Suppose that a firm produces two products. Should the firm always place the most emphasis on the product with the largest contribution margin per unit? Explain.
What are the four different elements of advertising? Are all of them appropriate to an average retailer in most markets?
Can ethics be taught in the college or university classroom? Why or why not?
Calculate the effective annual rate on each of the following loans: a. A $ 5,000 loan for two years, 10 percent simple annual interest, with principal repayment at the end of the second year b. A $...
In Exercises 1 to 4, it may be helpful to draw a figure such as Figure 5.5. Figure 5.5. Using the normal curve table, determine the area of the standard normal distribution that is between the mean...
West Coast Designs produces three products: super, deluxe, and generic. Super and deluxe are its main products; generic is a by-product of super. Information on the past months production processes...
Following your finalization of the preparation of Financial Statements of ABC PLC for the financial year ended 31 December 2021, you also have a task to undertake an analysis of these financial...
Both Novador and Sashimia are members of the WTO. Sashimia is also one of 12 fishing nations that are members of the Southern Atlantic Tuna Fishing Organization (SATFO). SATFO was established in 1998...
Some firms finance their permanent working capital with short-term liabilities (commercial paper and short-term notes). Explain the impact of this decision on the profitability and risk of these...
Risk associated with the amount of current assets is generally assumed to decrease with increased levels of current assets. Is this assumption always correct for all levels of current assets - in...
Butler Corp. maintains its financial records on the cash basis of accounting. Interested in securing a long-term loan from its regular bank, Butler Corp. requests you to convert its cash-basis income...
When you see customers seemingly disappearing from one period to the next, are you overreacting? What explanations do you offer, and what kinds of tactics do you engage in as a result (e.g., customer...
Have you ever gone a step further to decompose these changes into their underlying components (i.e., number of transactions, average spend per transaction, average margin)? How are these components...
What about the bottom-decile customers? Are you aware of their characteristics, and possible ways to bolster their profitability (e.g., by mitigating their cherry-picking behavior)?
What will it take to shift most of those conversations from focusing on the product time face to the customer time face?
In the same way many companies conduct period-to- period analyses (e.g., same-store sales comparisons), do you conduct cohort-to- cohort analyses as routinely and regularly?
A is an n n matrix. Justify each answer. (T/F) If v 1 and v 2 are linearly independent eigenvectors, then they correspond to distinct eigenvalues.
Integration is a vital concept when applied in one?s life. Integrating your life means making ideal choices. Perfect choices on the other go in line with quality decisions. Quality decisions lead to...
Tunney Industries can issue perpetual preferred stock at a price of $47.50 a share. The stock would pay a constant annual dividend of $3.80 a share. What is the companys cost of preferred stock, rp?
Percy Motors has a target capital structure of 40% debt and 60% common equity, with no preferred stock. The yield to maturity on the companys outstanding bonds is 9%, and its tax rate is 40%. Percys...
Javits & Sons common stock currently trades at $30.00 a share. It is expected to pay an annual dividend of $3.00 a share at the end of the year (D1 ! $3.00), and the constant growth rate is 5% a...
A function is given. r(t) = 5 - t; t = 5, t = 10 (a) Determine the net change between the given values of the variable. (b) Determine the average rate of change between the given values of the...
Why are certain functional dependencies called trivial functional dependencies? Explain what is meant by repetition of information and inability to represent information. Explain why each of these...
When is a table in BCNF? Explain what this means and provide a specific example? What is a surrogate key, and when should you use one? Give specific examples ? What is normalization? Why is it...

Suppose that a firm finances its seasonal (temporary) current assets with long-term funds. What is the impact

Question:

Step by Step Answer:

The use of permanent financing for shortterm needs may r...View the full answer

Fundamentals Of Financial Management

Students also viewed these Finance questions