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Homework answers / question archive / 1)Which of the following is an example of a market risk for a company that manufactures automobiles? a) Being suddenly unable to source a critical component of the automobile b) Damage to completed cars being transported to a buyer c) A competitor that offers a similar line of cars with comparable quality at lower prices d) A failure in the company's accounts receivable process 2
1)Which of the following is an example of a market risk for a company that manufactures automobiles?
2. When performing capital budgeting, __________ incurred by a project are irrelevant to future investment decisions.
3. When managing its cash, a company should make use of float to __________.
4. Which of the following is an advantage of venture capital?
1] C) A competitor that offers a similar line of cars with comparable quality at lower prices.
Since the company that manufactures automobiles their major market risk will be competitors. If they offers the similar products for a lower price then it will stand as a market risk.
2] a) sunk costs
A sunk cost is a cost that cannot be recovered or changed and is independent of any future costs a business may incur. Since decision-making only affects the future course of business, sunk costs should be irrelevant in the decision-making process.
3] b) increase the length of the disbursement cycle
Float in Relation To Cash Management When managing cash disbursements, a company should endeavor to increase the amount of time present in the disbursement cycle. In other words, it is appropriate to delay making payments until they come due in order to have use of available cash for as long as possible.
4] b) New companies can access large amounts of upfront capital that does not have to be repaid, as a loan would be.
Many small business loans for startups are limited to $5 million and qualifying can be difficult. However, venture capital is available in amounts as small as $100,000 for a seed stage and more than $25 million for more mature startups in large markets. There is also a tendency for startups to raise venture capital several times, allowing companies to access a large amount of capital that would otherwise be impossible.
