Question
Which of the following statements is correct? The optimal current asset investment policy is a restricted investment policy because it minimizes costs associated with maintaining
Which of the following statements is correct? The optimal current asset investment policy is a restricted investment policy because it minimizes costs associated with maintaining high current asset holdings. One disadvantage of a relaxed current asst investment policy is that it can lead to production delays, work stoppage, and unhappy customers if the level of current assets held is not high enough to meet demand for the firm's product(s). One advantage of a restricted current asset investment policy is that it minimizes potential operating problems caused by inventory shortages. Maturity matching is often not possible in the real world because of uncertainty about the life of an asset, making it difficult to finance the asset with capital that has a similar maturity.
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