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"Working capital management primarily involves long-term planning.

A True
B False"

User Dizzwave
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Final answer:

Working capital management deals with short-term financial aspects, not long-term planning. It ensures liquidity for operational needs and short-term solvency. Long-term planning involves strategic decisions impacting a firm's future growth and sustainability.

Step-by-step explanation:

The statement that working capital management primarily involves long-term planning is false. Working capital management is focused on the short-term aspects of a business, particularly the management of current assets and current liabilities. Through effective working capital management, businesses aim to ensure they maintain sufficient cash flow to meet short-term debts and operational expenses. Long-term financial planning, on the other hand, often involves decisions related to capital expenditure on assets like machinery or buildings that have a useful life extending beyond one year, raising financial capital, and investment strategies that affect a firm's long-term sustainability and growth. Therefore, while working capital management may have implications for long-term financial health, its primary focus is on the liquidity and short-term solvency of the company.

Businesses not only operate in the short run but also need to focus on long-term planning to ensure sustainability and growth. This includes addressing concerns like balance of trade, dealing with volatile inflation, and choosing strategic investments that involve substantial long-term costs. It is essential for businesses to balance their short-term operational needs with their long-term strategic goals, which may include raising financial capital through various means such as reinvestment of profits, borrowing, or selling stock.

User Arne Klein
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