Reading 46: Working Capital Management LOSa习题精选 company, primary, position, 2010

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LOS a: Describe primary and secondary sources of liquidity and factors that influence a company's liquidity position.

An example of a secondary source of liquidity is:

A) cash flow management.

B) negotiating debt contracts.

C) trade credit and bank lines of credit.

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Secondary sources of liquidity include negotiating debt contracts, liquidating assets, and filing for bankruptcy protection and reorganization. Primary sources of liquidity include ready cash balances, short-term funds (e.g., trade credit and bank lines of credit), and cash flow management.

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The condition that occurs when a company disburses cash too quickly, stretching the company’s cash reserves, is best described as a:

A) drag on liquidity.

B) liquidity premium.

C) pull on liquidity.

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When cash payments are made too quickly, the condition is known as a pull on liquidity. A drag on liquidity occurs when cash inflows lag.