A flexible short-term financial policy:
I.increases shortage costs due to frequent cash-outs.
II.tends to increase sales as compared to a restrictive policy.
III.requires a sizeable investment in current assets.
IV.incurs more carrying costs than a restrictive policy.

Question

Quizplus · Accepted Answer

A flexible short-term financial policy typically involves maintaining a higher level of current assets to meet short-term obligations, which can support sales by ensuring that the company can meet customer demand. This approach incurs more carrying costs due to the larger investment in current assets, contrasting with a restrictive policy that aims to minimize holdings in current assets to reduce costs.

A Flexible Short-Term Financial Policy