Question

Which of the following are associated with a restrictive short-term financial policy?

i. Flexible credit policy
ii. Minimal investment in marketable securities
iii. High level of accounts receivable
iv. High number of inventory stock-outs
a) i and ii
b) ii and iii
c) iii and iv
d) i and iv

Answer 1

A restrictive short-term financial policy is characterized by minimal investment in marketable securities and a high number of inventory stock-outs, differing from relaxed policies that may allow for higher receivables and more flexible credit terms.

Step-by-step explanation:

Regarding the restrictive short-term financial policy, the associated characteristics include a minimal investment in marketable securities, a higher occurrence of inventory stock-outs, a tighter credit policy, and a lower level of accounts receivable. A flexible credit policy and a high level of accounts receivable are indicative of a more relaxed financial policy rather than a restrictive one. Therefore, the options that are associated with a restrictive short-term financial policy are minimal investment in marketable securities (to maintain liquidity) and a high number of inventory stock-outs (due to maintaining low inventory levels to reduce costs).