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

question 17

Multiple Choice

Which 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 management strategy.
• B) If carrying costs are smaller than shortage costs, then the firm will maximize value by adopting a more restrictive strategy.
• C) If shortage costs dominate carrying costs, the firm will need to move toward a more flexible policy.
• D) Management will try to find the level of current assets that minimizes the sum of the carrying costs and shortage costs.

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