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Unformatted text preview: chniques for implementing these four strategies are the focus of the remainder
of this chapter and the following chapter. Review Questions
14–4 What is the difference between the firm’s operating cycle and its cash conversion cycle?
14–5 Why is it helpful to divide the funding needs of a seasonal business into its
permanent and seasonal funding requirements when developing a funding
14–6 What are the benefits, costs, and risks of an aggressive funding strategy
and of a conservative funding strategy? Under which strategy is the borrowing often in excess of the actual need?
14–7 Why is it important for a firm to minimize the length of its cash conversion cycle? LG3 14.3 Inventory Management
The first component of the cash conversion cycle is the average age of inventory.
The objective for managing inventory, as noted above, is to turn over inventory
as quickly as possible without losing sales from stockouts. The financial manager
tends to act as an advisor or “watchdog” in matt...
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