A Flexible Short-Term Financial Policy

question 27

Multiple Choice

A flexible short-term financial policy:

• A) increases the need for long-term financing.
• B) minimizes net working capital.
• C) avoids bad debts by only selling items for cash.
• D) maximizes fixed assets and minimizes current assets.
• E) is most appropriate when carrying costs are high and shortage costs are low.

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Definitions:

Risk-Adjusted Return

A measure of an investment's return that accounts for the level of risk taken, allowing for the comparison of investments with different risk levels.

Mutual Funds

Shareholder-funded investment initiatives that engage in diversified portfolios and are managed by experts.

Return

The gain or loss on an investment over a specific period, usually expressed as a percentage of the investment's initial cost.

Total Risk

The complete range of risks associated with an investment, including both systemic and unsystematic risk.