Which one of the following statements is correct concerning the short-term financial policy of a firm?
A) A flexible short-term policy maintains a relatively low ratio of current assets to sales.
B) A restrictive short-term policy calls for less short-term debt and more long-term debt.
C) A flexible short-term policy closely resembles an all-cash-sales policy.
D) A flexible short-term policy leads to a high level of net working capital.
E) A restrictive short-term policy provides more liquidity than does a flexible policy.

Question

Quizplus · Accepted Answer

A flexible short-term financial policy typically involves maintaining a higher level of current assets relative to sales, which results in a higher level of net working capital. This approach provides more liquidity to meet unexpected demands or take advantage of opportunities.

Which One of the Following Statements Is Correct Concerning the Short-Term