Asked by Christine Angora on Jun 05, 2024
Verified
An effective program of working capital management requires that:
A) the firm run with the absolute minimum in each current asset account.
B) a series of cost/benefit tradeoffs be considered because running a business is easier with more working capital than with less, but holding working capital costs money.
C) large inventories be maintained to adequately service customers.
D) credit can be easily granted to customers to encourage higher sales.
Working Capital Management
The practice of managing a company's short-term assets and liabilities to ensure it has sufficient liquidity to run its operations efficiently.
Cost/Benefit Tradeoffs
The analysis or decision-making process regarding the advantages and disadvantages (costs and benefits) of a given action or investment.
Current Asset Account
A balance sheet account that represents the value of all assets that can reasonably be expected to be converted into cash within one year.
- Recognize the implications of working capital management decisions on a firm’s liquidity.
- Evaluate the significance of efficient working capital management.
Verified Answer
Learning Objectives
- Recognize the implications of working capital management decisions on a firm’s liquidity.
- Evaluate the significance of efficient working capital management.
Related questions
Which of the Following Is Not an Element of Working ...
The Size and Nature of a Firm's Investment in Current ...
Data from Dunshee Corporation's Most Recent Balance Sheet Appear Below ...
If Two Companies Have the Same Current Ratio, Their Ability ...
An Advantage of the Current Ratio Is That It Considers ...