MOG 1012 : Ch6.2 - WC & Financing Decision

Heavy risk exposure due to short-term borrowing can be compensated for by carrying illiquid assets.

Heavy use of long-term debt will allow a firm to carry less liquid, more profitable assets.

Liquidating current assets is like liquidating fixed assets since they have lives greater than one year.

Immediate access to capital markets allows greater risk-taking capability.

During tight money periods, short-term financing may be difficult to find.

Firms with highly volatile and perishable inventory should assume relatively low levels of risk.

One of the primary benefits of implementing supply chain management is reducing inventory on hand.

The expected value is the sum of the probabilities of all expected events.

Firms with predictable cash-flow patterns should assume relatively low levels of risk.

The more short-term financing relative to long-term financing, the riskier the financial structure.