Question

Which of the following statements is correct?

Group of answer choices

If carrying costs dominate shortage costs, the firm will need to move toward a more flexible policy.

Under the restrictive current asset management strategy, the current assets are kept at a minimum.

The downside of restrictive current asset management strategy is the high carrying cost associated with owning a high level of inventory and providing liberal credit terms to customers.

With the maturity matching strategy, all seasonal working capital needs and a portion of permanent working capital and fixed assets are funded with short-term debt.

All the answers are correct.

Answer 1

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Answer:

a)

If shortage costs dominate carrying costs, the firm will ned to move towards a more flexible policy

b)

Current assets are kept at a minimum under the restrictive strategy. - True

c)

The strategy's downside is the high carrying cost associated with owning a high level of inventory and providing liberal credit terms to its customers. - False as that is for flexible strategy

d)

With the maturity matching strategy, all seasonal working capital needs and a portion of permanent working capital and fixed assets are funded with short-term debt. - False