Question 1 a. Discuss the factors that are likely to influence the desired level of cash of...

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Accounting

Question 1
a. Discuss the factors that are likely to influence the desiredlevel of cash of a company (5
marks)
b. Outline the advantages and disadvantages of using short termdebt, as opposed to long
term debt, in the financing of working capital
c. Why cash flows rather than profits are most desirable infinancial management? (5
marks)
d. Explain the term “agency relationships” and discuss theconflicts that might exist in the
relationship between’
i) Shareholder and managers
ii) Shareholders and creditors
What steps may be taken to overcome these conflicts?

Answer & Explanation Solved by verified expert

3.7 Ratings (318 Votes)

Part A Factors that are likely to influence the desired level of cash of a company are as follows 1 Inventory turnover If inventory turnover is not more or if inventory is kept with company for large period then our working capital will be blocked 2 Credit terms and policies of company with their creditors It affects the cash level as if the credit policy will be of less period then we need to pay the amount in shorter period which directly affects our cash level 3 Terms of Credit with their debtors It affects the cash level as if the credit policy will be of long period then we will receive amount from our receivables debtos in large period which can affect our working capital including cash Part B See Answer

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