Question

With a relaxed working capital policy, a firm tries to hold ____ amount of cash, inventories, and receivables, and ____ amount of accruals and payables.

____

Maximum; minimum

Maximum; maximum

Minimum; maximum

Minimum; minimum

Answer 1

With a relaxed working capital policy, a firm tries to hold Maximum amount of cash, inventories, and receivables, and Minimum amount of accruals and payables.

Relaxed working capital will lead to high amount of net working capital. Working Capital =(Current Assets – Current Liabilities).

If the working capital is high, the current assets(cash, inventories, receivables) will be maximum and the current liabilities (accruals and payables)will be minimum .

Maximum,Minimum