Determining a firm's optimal investment in working capital and deciding how that investment should be financed are critical to working capital management.

Question

Quizplus · Accepted Answer

Determining the optimal investment in working capital helps ensure that the firm has enough liquidity to meet its operational needs, while also minimizing excess holdings that tie up capital. Deciding how to finance this investment is also important as it affects the firm's cost of capital and financial flexibility.

Determining a Firm's Optimal Investment in Working Capital and Deciding