Which One of the Following Statements About Working Capital Trade-Off

question 12

Multiple Choice

Which one of the following statements about working capital trade-off is NOT true?

• A) Financial managers need to balance shortage costs against carrying costs to find an optimal strategy.
• B) If carrying costs are smaller than shortage costs, then the company will maximise value by adopting a more restrictive strategy.
• C) If shortage costs dominate carrying costs, the company will need to move toward a more flexible policy.
• D) Management will try to find the level of current assets that minimises the sum of the carrying costs and shortage costs.

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Definitions:

Material

The substance or substances out of which an object or item is made, which can influence its properties and usage.

Finishing

The process of applying final surface treatments to materials or components to achieve desired aesthetic or functional characteristics.

Machining Symbol

A type of symbol used on engineering drawings to indicate the type of machining operation required, surface texture, or surface roughness on a part.

Leader

In drafting and design, a line that connects a note or symbol to a specific location, typically used for annotations.