Determining a firm's optimal investment in net operating working capital and how that investment is financed are elements of working capital policy.

Question

Quizplus · Accepted Answer

A firm's working capital policy includes decisions about how much to invest in net operating working capital and how that investment will be funded. This involves managing the levels of current assets and current liabilities to ensure that the firm has sufficient liquidity and operational efficiency. The optimal investment in net operating working capital depends on various factors such as the firm's size, growth prospects, industry, and competition. The financing of working capital can be done through various sources such as short-term loans, trade credit, or internal funds. Therefore, the statement is true.

Determining a Firm's Optimal Investment in Net Operating Working Capital