Urban Outfitters Continuing Case Study

Part 3: Financing a Business

Review Questions

1. What did Benjamin Franklin mean by “necessity never made a

good bargain?” Why?

If a person needs a product — they will be willing to pay above &

beyond the normal asking price. Especially if the product is a

commodity.

Also ── I believe the message Benjamin Franklin is trying to send → plan for the expected & be prepared for the unexpected ─ for there is

no time for bargaining with the absolute need for now.

2. How does “cash in the bank” improve company performance?

By putting money to work — by investing in liquid assets that offer an

attractive rate of return.

3. Give examples of companies that became too involved in risky

finance.

When the booming financial markets ── during the 21st century this

lured financial mangers into overconfidence —— resulting in overly

risky decisions.

Firms invested heavily & pretty much lost everything ── they

couldn’t pay for their homes, cars, & not even the basic

necessities.

4. After reading this case, would you be more or less inclined to

use debt to expand your business?

More inclined ── if the business needed money and the market was strong &

I financed correctly there would be low risk

If I had to choose ── I would want to owe money to a lender and pay

back in fixed amounts.