Which of the Following Could Offset the Higher Risk Exposure

question 52

Multiple Choice

Which of the following could offset the higher risk exposure a company would face if its current ratio and net working capital were relatively low?

• A) Its current assets would need to be highly liquid.
• B) Its accounts receivable collection policy could increase the average collection period.
• C) It could offer no discounts for early payment by its customers.
• D) It could buy back some of its shares in the open market in order to reduce its equity.

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Definitions:

Vertically Integrated

A business structure where a company controls multiple stages of production within its supply chain, from raw materials to final product delivery.

Overstock Quantity

Excess inventory beyond what is normally sold, leading to surplus stock that requires additional storage or markdowns for clearance.

Optimal Quantity

The most efficient, cost-effective or beneficial amount or number of something for a specific purpose or condition.

Replenishment Lead Time

The time interval between placing an order and receiving the goods, critical for inventory management.