Urban Outfitters Continuing Case Studies free essay sample

Outfitters Continuing Case Study Part 3: Financing A Business Sylvia Taylor Instructor: Joyce Davis Introduction to Business November 20, 2009 The following questions are from this case study on Urban Outfitters and are answered as follows: Question: Explain what Benjamin Franklin means by necessity never made a good bargain. Explain why this is true.Answer: The statement necessity never made a good bargain was taken from Poor Richard, 1735 William, because his Wife was something ill, uncertain in her Health, indifferent still, He turned her out of Doors without reply: I asked If he that Act could Justifies. In Sickness and In Health, says he, Im bound To keep her; when shes worse or better found Ill take her in again: And now youll see, Shell quickly either mend or end, says he. The Family of Fools Is ancient. Rear. Theres many witty men whose brains cant fill their bellies. We will write a custom essay sample on Urban Outfitters Continuing Case Studies or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Weighty Questions ask deliberate Answers. L Mr..Franklin was discussing his wifes illness in this statement but I believe he was saying that even though something may seem necessary at the time, it may not turn out o be a good bargain in the end. Like other firms with a steady cash flow, Urban Outfitters wanted to put its money to work by investing in liquid assets that offered an attractive rate of return. The booming financial markets of the early twenty-first century lured many financial managers into overconfidence, resulting in overly risky financial decisions. Many firms invested heavily in the complex and risky financial instruments ND suffered the consequences. Fortunately, Urban Outfitters didnt fall into this trap. Caution and cash, patience and liquidity paid off in a time when wings could have been worse. 2 Question: Explain how cash in the bank improves company performance. Answer: A firm must have adequate cash to pay its workers, creditors, suppliers and an agency called the IRS. It also needs cash to pay dividend to stockholders, take advantage of unexpected investment opportunities and cope with unexpected problems. If the cash balance falls too low, the firm may find its ability to conduct business severely compromised. Question: Give three examples of companies that became too involved in risky finance. Explain why what they did as risky. Answer: Walters companies such as Bear Sterns and Lehman Brothers, were noted in our case study, and it was stated that they Just ceased to exist. Enron would be another company that took too many risk and now they are trying to restructure but the damage has been done. It was also risky because overconfidence can result in bad financial decisions. Question: After reading this case, would you be more or less inclined to use debt to expand your business? Give three reasons for your answer.