Firms following a restricted current asset policy are likely to __________ holdings of cash and have a __________ credit policy on sales.

Question

Quizplus · Accepted Answer

Firms following a restricted current asset policy aim to minimize their investment in current assets including cash. Therefore, they are likely to minimize the holdings of cash. Additionally, in order to collect receivables quickly and reduce the need for financing, they are likely to adopt a conservative credit policy and offer limited credit to customers. Therefore, they would have a conservative credit policy on sales to minimize the investment in accounts receivable.

Firms Following a Restricted Current Asset Policy Are Likely to __________