Reference no: EM131765652

3) The most obvious way to reduce or eliminate our need for external financing is to reduce that rate at which we grow our sales. Calculations seem to suggest that if I grow by 20% over 4 years my need for financing will be much less than if I grow by 20% in one year. Why is that? It's still 20%, and I'm still going to need to increase my asset investment proportionally, so what explains the reduction in necessary financing?

4) Spontaneous liabilities include accounts payable (money we owe to suppliers for materials they've sold to us on credit) and accruals (for example, wages we owe to workers for work they've done over the past few days or weeks). We could increase these spontaneous liabilities, and thus reduce our need for external financing, by extending the time we take to pay our suppliers, or by paying our workers monthly rather than weekly. Let's do it! Do you anticipate any problems?