Question

Which of the following is indicative of a short-term restrictive financial policy? a) purchasing inventory only as needed b) granting credit to more customers c) increased investment in marketable securities d) maintaining a large accounts receivable balance

Answer 1

Answer:

The correct answer is A

Explanation:

Short term restrictive financing policy is the policy which is entails the low ratio of the current assets to the sales. This policy is grounded on the liabilities which are short term in nature.

In order to maintain the low ratio of the current assets to the sales, one needs to purchase or bought the inventory

Answer 2

Answer:

a) purchasing inventory only as needed

Explanation:

Flexible short term financial policy maintain higher ratio of current asset and restrictive short term financial policy maintain low ratio of current asset to sales.

Flexible short term financial policy provide long term debt and make large investment in inventories.

Restrictive short term financial policy make smalled investment in inventories and it also provide no credit sales.

Hence, as per given case short term restrictive financial policy purchase inventory only as needed.