Which of the Following Statements Regarding Working Capital Management Is

question 40

Multiple Choice

Which of the following statements regarding working capital management is (are) true?

• A)An irrevocable credit line will allow a firm to maintain its financial flexibility, even in times of financial distress, and is relatively low cost.
• B)Investing cash in liquid assets, such as Treasury bills, allows a firm to maintain financial flexibility at no cost.
• C)Matching income with liability streams works best if your cash flows are fairly predictable.
• D)All of the above are true statements.

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Definitions:

Common Shares

Equity ownership units in a corporation, entitling holders to dividends and voting rights.

Efficient Markets Hypothesis

The theory that all available information is already reflected in stock prices, implying that it is impossible to consistently achieve higher returns.

Semistrong-Form

A theory related to the Efficient Market Hypothesis that asserts all public information is already reflected in stock prices, along with historical information.

Weak-Form

In finance, a hypothesis suggesting that past stock prices and volumes are not predictive of future stock prices.