Number of Essays Ch 16 - E Essay Questions 90(p 505-506...

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Essay Questions E 90. (p. 505-506) Explain how the over-the-counter markets differ from other exchanges. The over-the-counter market is a network of dealers all over the country linked by computers, telephones, and teletype machines. Unlike the other exchanges, it does not have a central location. Also, the dealers own the securities they trade, and they buy and sell their own inventories of securities. So, the dealers must balance their supply of securities by changing the prices they charge to buy and sell. AACSB: Reflective Thinking A Bloom's Taxonomy: Comprehension B Difficulty: Medium D Learning Objective: 6 L
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91. (p. 513) Normally, rapidly increasing sales is a good thing. What seems to be the problem here? A rule of thumb in finance is to always match short- and long-run investments with short- and long-term financing, respectively. Organizations experiencing a temporary surge in sales may use short-term loans to finance the increased sales (added costs from overtime, extra raw materials, and so forth). However, short-term funds come at a premium, which is why they
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