A Firm Tries to Extend Its Disbursement Float in Order

question 68

Multiple Choice

A firm tries to extend its disbursement float in order to reduce its working capital needs. Which of the following is a risk that may be associated with this strategy, if it is taken too far?

• A) may attract a late fee
• B) may be required to pay before delivery for future supplies
• C) may jeopardize the entire relationship with the supplier
• D) all of the above

Identify the typical expected holding periods for venture capital investments.

Grasp the reasons why investors stage their capital commitments.

Understand the valuation methods for private companies and their implications.

Appreciate the importance of legal and accounting advice in the deal-making process.

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Definitions:

Elastic Demand

A situation where the quantity demanded of a product is highly responsive to changes in its price.

Inelastic Demand

The condition when the quantity demanded of a product changes very little in response to changes in its price.

Profit-Maximizing

The approach by which an enterprise figures out the optimal pricing and production levels for the highest profit return.

Marginal Revenue

The supplementary income resulting from the sale of one more good or service unit.