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a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs. c. Assuming that short-term funding costs 5% annually and that the cost of long-term funding is 10% annually, use the averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that the firm can earn 3% on any excess cash balances. d. Discuss the profitability-risk trade-offs associated with the aggressive strategy and those associated with the conservative strategy.

a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs. c. Assuming that short-term funding costs 5% annually and that the cost of long-term funding is 10% annually, use the averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that the firm can earn 3% on any excess cash balances. d. Discuss the profitability-risk trade-offs associated with the aggressive strategy and those associated with the conservative strategy.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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e Aggressive versus conservative seasonal funding strategy Dynabase Tool has forecast its total funding requirements for the coming year as shown in the following table: E otions a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs. c. Assuming that short-term funding costs 5% annually and that the cost of long-term funding is 10% annually, use the averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that the firm can eam 3% on any excess cash balances. d. Discuss the profitability-risk trade-offs associated with the aggressive strategy and those associated with the conservative strategy. a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. The monthly average of the firm's permanent funding requirement is $ (Round to the nearest dollar.) The monthly average of the fimm's seasonal funding requirement is $ (Round to the nearest dollar.) b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a Click to select your answer(s). "pe here to search inser
Transcribed Image Text:e Aggressive versus conservative seasonal funding strategy Dynabase Tool has forecast its total funding requirements for the coming year as shown in the following table: E otions a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a conservative funding strategy. Assume that under the aggressive strategy, long-term funds finance permanent needs and short-term funds are used to finance seasonal needs. c. Assuming that short-term funding costs 5% annually and that the cost of long-term funding is 10% annually, use the averages found in part a to calculate the total cost of each of the strategies described in part b. Assume that the firm can eam 3% on any excess cash balances. d. Discuss the profitability-risk trade-offs associated with the aggressive strategy and those associated with the conservative strategy. a. Divide the firm's monthly funding requirement into (1) a permanent component and (2) a seasonal component, and find the monthly average for each of these components. The monthly average of the firm's permanent funding requirement is $ (Round to the nearest dollar.) The monthly average of the fimm's seasonal funding requirement is $ (Round to the nearest dollar.) b. Describe the amount of long-term and short-term financing used to meet the total funds requirement under (1) an aggressive funding strategy and (2) a Click to select your answer(s). "pe here to search inser
conservative se oming Data Table nonthly funding re hly ave in order to copy the contents of the data table below punt of long-term sume that under ort-term funding d gies described in tability-risk trade-d (Click on the icon here into a spreadsheet.) ding st sed to f nd in p Month Amount Month Amount $2,000,000 $2,000,000 $2,000,000 July August September $11,000,000 $15,000,000 January by: February monthly funding re $9,000,000 nly ave March October $8,000,000 $4,000,000 $5,000,000 April $3,000,000 $3,000,000 May November e of the firm's perr June $9,000,000 December e of the firm's seas Print Done ding str nount of long-term a answer(s).
Transcribed Image Text:conservative se oming Data Table nonthly funding re hly ave in order to copy the contents of the data table below punt of long-term sume that under ort-term funding d gies described in tability-risk trade-d (Click on the icon here into a spreadsheet.) ding st sed to f nd in p Month Amount Month Amount $2,000,000 $2,000,000 $2,000,000 July August September $11,000,000 $15,000,000 January by: February monthly funding re $9,000,000 nly ave March October $8,000,000 $4,000,000 $5,000,000 April $3,000,000 $3,000,000 May November e of the firm's perr June $9,000,000 December e of the firm's seas Print Done ding str nount of long-term a answer(s).
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