A flexible short-term financial policy:
A)increases the likelihood that a firm will face financial distress.
B)incurs an opportunity cost due to the rate of return that applies to short-term assets.
C)advocates a smaller investment in net working capital than a restrictive policy does.
D)increases the probability that a firm will earn high returns on all its assets.
E)utilizes short-term financing to fund all the firm's assets.

Question

Quizplus · Accepted Answer

A flexible short-term financial policy involves maintaining a higher level of current assets, which can lead to an opportunity cost as these assets typically earn lower returns compared to long-term investments.

A Flexible Short-Term Financial Policy