Question

Which one of the following is a working capital management decision?

1) Investing in new machinery
2) Hiring new employees
3) Determining the optimal level of inventory
4) Expanding into new markets

Answer 1

The correct working capital management decision among the given options is determining the optimal level of inventory, as it directly relates to the management of a firm's current assets and short-term liabilities.

Step-by-step explanation:

The question asks to identify which option is a working capital management decision. Working capital management is concerned with managing the short-term assets and liabilities of a company. Among the options provided:

• Investing in new machinery is a capital budgeting decision.
• Hiring new employees can be considered a human resources decision.
• Determining the optimal level of inventory is indeed part of working capital management.
• Expanding into new markets is a strategic decision related to growth.

Therefore, the correct answer is determining the optimal level of inventory, as it relates to the management of a firm's current assets and involves decisions related to maintaining sufficient stock to meet customer demand without incurring unnecessary holding costs.