FIN 466 – Winter 2016
Exam1 - Concept Questions
1. When the date that cash is disbursed comes before the date that cash is received on the cash flow
timeline, how might the financial manager procure funding for the disbursements?
2. Why do firms have working capital?
3. What is liquidity and how does it differ from solvency?
4. Is it possible for a firm to have high (low) solvency ratios but a low (high) CCP?
5. How would you interpret the cash burn rate?
6. What are the two components of the total period cost addressed in the Baumol model? Why does one
cost component increase as the other decreases?
7. What are the financial manager’s concerns related to inventory management?
8. How is risk handled by the EOQ model?
9. Is trade credit “free”? Explain.
10. List and explain the four major motives financial theorists have attributed to the extension of trade
credit.