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Explain how rapidly expanding sales can drain the cash resources of a firm. Discuss the relative volatility of short- and long-term interest rates.

6-1. Explain how rapidly expanding sales can drain the cash resources of a firm.
6-2. Discuss the relative volatility of short- and long-term interest rates.
7-1. In the management of cash and marketable securities, why should the primary concern be for safety and liquidity rather than maximization of profit?
7-2. Briefly explain how a corporation may use float to its advantage.
8-1. Under what circumstances would it be advisable to borrow money to take a cash discount?
8-2. Discuss the relative use of credit between large and small firms. Which group is generally in the net creditor position, and why?
8-3. How have new banking laws influenced competition?

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6-1. Explain how rapidly expanding sales can drain the cash resources of a firm.

To support the rapidly growing sales, there is more and more need for investment in current assets and most of this increase in current assets will be permanent in nature. There will be need for more raw material purchases and stock, more work in progress inventory and more finished goods inventory. Rapid growing sales will also lead to substantial increase in receivables. Hence, rapidly expanding sales needing a buildup in assets to support the growth will drain the cash resources of the firm.

6-2. Discuss the relative volatility of short- and long-term interest rates.

Short term interest rates fluctuates based on demand and supply of funds in the market and hence are more volatile. The long term interest rates are relatively ...

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