HW Solutions_Session 1_Parrino Ch 1

HW Solutions_Session 1_Parrino Ch 1 - T H IS DOCUMENT IS...

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THIS DOCUMENT IS STRICTLY FOR THE USE OF CURRENT STUDENTS IN MGMT 640 COURSE. IT MAY NOT BE REPRODUCED OR DISTRIBUTED TO OTHERS, INCLUDING ANY FUTURE STUDENTS OF THE COURSE. Session 1 Homework Solutions 1.1 Capital: What are the two basic sources of funds for all businesses? Solution: The two basic sources of funds for all businesses are debt and equity. The debt capital for large U.S. corporations is primarily in the form of long-term debt (bonds) and equity is in the form of capital provided by common stockholders. In case of small businesses (particularly privately owned), debt capital is in the form supplier credit and bank financing. Equity capital in small firms is contributed by founders, family members, and close groups as opposed to widely-held ownership of large corporations. 1.2 Management role: What is working capital management? Solution: It is the management of current assets, such as inventory, and current liabilities, such as money owed to suppliers. Typically, current assets include: cash & marketable securities, accounts receivable, inventory, and pre-paid wages/taxes. Current liabilities include: accounts payable, notes payable, current maturities of debt obligations,
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HW Solutions_Session 1_Parrino Ch 1 - T H IS DOCUMENT IS...

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