QUESTIONS

Dr. Long Phi Tran

1
Question 1
What is working capital? Critically
evaluate the importance of working
capital management.

2
Question 2
Discuss the characteristics of working
capital. Critically evaluate the following
statement: The most important
characteristics of working capital is its
quick liquidity.

3
Question 3
Compare the operating cycle and the
cash cycle. Critically evaluate the
following statement: The operating
cycle is always longer than the cash
cycle.

4
Question 4
Define the components of working
capital. What is the most important
component of working capital?

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Question 5
What are working capital
requirements? Discuss factors
influencing working capital
requirements. Critically evaluate the
following statement: Managing
working capital is to manage factors
affecting working capital requirements.

6
Question 6
Discuss the instruments used to
finance working capital requirements.
Critically evaluate the following
statement: Bank credit is the most
important instruments to finance
working capital requirements.

7
Question 7
Compare and contrast permanent and
temporary working capital. How can
these concepts be used to analyze the
working capital financing approach?

8
Question 8
How can we use the ratio analysis in
working capital management?
Critically evaluate the following
statement: A company with long cash
conversion cycle will have higher firm
value.

9
Question 9
What is the reason for holding cash?
What is cash budget?

10
Question 10
Compare and contrast the Baumol
model and Miller-Orr model of
managing cash. Critically evaluate the
following statement: Miller-Orr model
is the best model of managing cash.

11
Question 11
Discuss factors that influence the
target cash balance. Critically
evaluate the following statement: A
company will always buy marketable
securities when it has surplus cash.

12
Question 12
What is float in the context of cash
management? How can a company
accelerate cash collections and delay
cash disbursements?

13
Question 13
Analyze a firm’s credit policy. Critically
evaluate the following statement: The
only purpose of trade credit is to
increase sales.

14
Question 14
Explain the meaning and implication
of credit term “1/10, net 30”. Analyze
the importance of credit management
department.

15
Question 15
Discuss the credit policy effects on the
sales and costs of a company.
Compare and contrast trade credit
with standard loans.

16
Question 16
Why are repeat customers more
valuable than one-time customers?
Critically evaluate the following
statement: A company will give trade
credit to a new customer if the net
present value from this trade credit is
positive.

17
Question 17
What is credit analysis in the context
of managing accounts receivable?
Why does a company need to
implement credit analysis?

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Question 18
Discuss the tools of monitoring
accounts receivables (give examples
if necessary). How can a company
use these tools to set up a penalty
and reward system to accelerate cash
collections?

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Question 19
What is factoring? What does it mean
by “stretching accounts payable?”
Analyze the potential consequences
when a company is going to stretch
accounts payable.

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Question 20
Analyze the benefits and the costs of
having inventory. Critically evaluate
the following statement: A company
should hold a level of inventory where
the benefits of holding inventory equal
the costs.

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Question 21
What are the objectives of inventory
management? Critically evaluate the
following statement: Economic
Ordering Quantity is the best model to
manage inventory.

22
Question 22
Compare and contrast deterministic
and stochastic models of inventory
management. Define the safety stock
and reorder point of the two models.

23
Question 23
What are the objectives of working
capital management? Critically
evaluate the following statement:
Working capital management has the
most important role in corporate
finance.

24
Question 24
What is the role of financial planning?
Compare and contrast long-term and
short-term financial planning.

25
Question 25
Show steps to calculate External
Financing Needed. Critically evaluate
the following statement: Issuing new
debt is always better than issuing new
equity because new debt can
generate a tax shield for the company.

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Question 26
What method should a company do if
it has a positive/negative external
financing needed? Explain the
benefits and costs of each method.

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Question 27
Analyze the determinants of the
growth of a company. What is the
meaning of the internal and
sustainable growth rate. Critically
evaluate the following statement: The
internal growth rate is always smaller
than the sustainable growth rate.

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Question 28
What is the purpose of short-term
financing? Why does a company need
short-term financing? Critically
evaluate the following statement: A
company should not hold surplus cash
in all situations.

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