Finance- Your company is involved in the purchasing and processing

| January 30, 2017

Question
1. Your company is involved in the purchasing and processing of corn from farms in the Mid­Western
portion of the U.S. to produce ethanol used in fuel for vehicles. Your company treasurer wants to make
use of options in the purchasing of the corn used in this process. Could you use options in this manner?
Could the use of options in this manner result in possible losses?
2. In your continuing effort to understand the types of options you have been studying material in Chapter
20 of our textbook. One issue that has come to light is the two kinds of options, ie. American options and
European options. What have you learned about these two items that will be useful in your
understanding of options?
Chapter 26
1. During recent periods of your company purchase of corn from farmers and the processing of that
product into ethanol the demand for your finished product has decreased. This has resulted in increasing
inventory of corn and slower collection on your receivables. Describe the calculations you might use to
track the impact of these trends upon your company’s working capital. What changes in your company
operations could you make to improve the working capital?

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