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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 strategy? 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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This document was uploaded on 01/19/2014.

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