A Firm That Follows a Restricted Current Asset Investment Policy

question 43

Multiple Choice

A firm that follows a restricted current asset investment policy generally has:

• A)uncertain sales.
• B)relatively low levels of accounts receivable.
• C)a lower return on investment, especially on current assets, than a firm that follows a relaxed current investment policy.
• D)a cash conversion cycle greater than the average firm in the industry.
• E)the highest inventory conversion period in the industry.

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Definitions:

Expected Monetary Value

A statistical technique in decision making used to calculate the average outcome when the future includes scenarios that may or may not happen.

Expected Value

The long-run average value of repetitions of the experiment it represents, often considered as the mean in probability.

Perfect Information

A situation in a game or economic model in which all participants know all the relevant details, including the actions and payoffs of all players.

Preposterior Analysis

An analysis performed to evaluate the potential worth of a decision or survey before it is conducted.