Question
When should a firm take an early-pay trade discount?
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Answer
When its annualized return exceeds borrowing cost.
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Question
What is the main goal of receivables management?
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Answer
Collect receivables quickly without harming customer relationships.
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Question
If a firm collects cash from customers before paying suppliers, what does that imply about its cash conversion cycle?
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Answer
It has a negative CCC.
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Question
A firm keeps high current assets and uses long-term funding for both fixed assets and working capital. Which financing strategy is this?
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Answer
Conservative.
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