When does a company move cash from its noninterest-bearing demand account to marketable securities? All companies face a tradeoff between their need for liquidity, which…

What special considerations enter the credit granting decision when the customer is paying in a foreign currency? Granting credit delays the date on which a…

The three primary components of a firm’s credit policy are credit standards, payment date, and price changes. Credit standards are the rules the company uses…

What are the costs and benefits of maintaining inventories? What does this tell you about the movement toward just-in-time systems? The costs of maintaining inventories…

Both types of leverage involve magnification. In both, we carefully construct our system to produce the magnified result. The differences are in what is magnified…

Both operating and financial leverage result in the magnification of changes to earnings due to the presence of fixed costs in a company’s cost structure….

Choice over operating leverage depends on the technologies available to a company. Some companies have little control over their operating leverage. For example, airlines which…

a. No fixed financing costs. A firm with no fixed financing costs has no financial leverage. In such a firm, earnings per share will rise…

a. Its profitability? Financial leverage changes a firm’s earnings per share. To the left of the indifference point (lower EBIT) between financing alternatives financial leverage…

A firm is considering two alternative capital structures, and has calculated its profitability at various EBIT levels under each structure. What should the firm do…