Regarding short-term financial policy, a flexible policy:

Multiple Choice

• A.Incurs an opportunity cost due to the rate of return that applies to short-term assets.

• B.Utilizes short-term financing to fund all of the firm's assets.

• C.Increases the probability that a firm will earn high returns on all of its assets.

• D.Advocates a smaller investment in net working capital than a restrictive policy does.

• E.Increases the likelihood that a firm will face financial distress.