Which one of the following statements is correct concerning the short-term ﬁnancial policy of a ﬁrm?

Question

Quizplus · Accepted Answer

A flexible short-term policy leads to a high level of net working capital because it maintains a higher ratio of current assets to sales, thus providing more liquidity and buffers against short-term financial emergencies. Choice A is incorrect because a flexible policy would maintain a higher ratio of current assets to sales, not a lower one. Choice B is incorrect as a restrictive policy would call for more short-term debt and less long-term debt. Choice C is incorrect because an all-cash-sales policy would not be considered a flexible short-term policy. Choice E is incorrect as a flexible short-term policy provides more liquidity than a restrictive policy.

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