The optimal current asset investment policy

Assignment Help Financial Management
Reference no: EM131616200

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.

Reference no: EM131616200

Questions Cloud

The firm should not pay any dividends : BuffTech, Inc. has a capital budget of $1,800,000 and projects a net income of $750,000. The firm should not pay any dividends.
Do you think this is a fair and ethical practice : How do you feel about tax breaks for large companies to entice them to come to a certain state or area? Do you think this is a fair and ethical practice?
Dividend irrelevance theory : Modigliani and Miller proposed the Dividend Irrelevance Theory,
How much is total mortgage payment annually : This mini-case takes us back to b-school grads Sally and Dave. How much is total mortgage payment annually?
The optimal current asset investment policy : The optimal current asset investment policy is a restricted investment policy because it minimizes costs associated with maintaining high current asset holdings
What is the nominal cost of its non-free trade credit : What is the nominal cost of its non-free (costly) trade credit?
Compute the payback statistic for project with cash flows : Payback Compute the payback statistic for Project with the following cash flows:
Calculate the overall net gain or loss : Calculate the gain or loss on the futures position. Calculate the overall net gain or loss.
Short position in european put option : A short position in a European Put Option has the right but not the obligation to buy the underlying asset at the strike price on date that contract matures.

Reviews

Write a Review

Financial Management Questions & Answers

  Collect and evaluate the data about stock performance

Collect and evaluate the data about stock performance of Microsoft Corporation for the last thee years (2014-2016), place in a table.

  What will be the earnings after tax

What will be the "earnings after tax and available for common stockholders" if the money is borrowed?- What will be the "earnings after tax and available for common stockholders" if preferred stock is sold?

  Investment project provides cash inflows

An investment project provides cash inflows of $950 per year for eight years. What is the project payback period if the initial cost is $3,450? What is the project payback period if the initial cost is $4,500?

  What price should they sell the bicycles

If they would like to earn 23% per unit, at what price should they sell the bicycles?

  How much was in account ten years after deposit was made

Six years after Mr. Robertson deposited $7110.00 in a savings account that earned interest at 6.8% p.a., compounded semi-annually, the interest was changed to 7.2% p.a., compounded quarterly. How much was in the account ten years after the deposit wa..

  What is impaled equity value and operating cash flow

You are using your comparable company set to value Jimmy Jones & Co. The average EBITDA multiple of the comps is 7.0x Jimmy Jones' EBITDA is 200M, and their net debt is 50M. What is Jimmy Jones' impaled equity value? Which of the following is NOT an ..

  Spread across three funds

Erin invests $3750 spread across three funds; Fund A, Fund B, and Fund C. Over the course of the following year, A(in dollars) was equal to %20 of the total return from all three funds fir the year. The amount invested in Fund B was equal to 1.2 time..

  The spot exchange rate of an australian dollar

Assume that the U.S. one-year interest rate is 3% and the one-year interest rate on Australian dollars is 6%. The U.S. expected annual inflation is 5%, while the Australian inflation is expected to be 7%. You have $100,000 to invest for one year and ..

  Compute the break-even point in units

The Hartnett Corporation manufactures baseball bats with Pudge Rodriguez’s autograph stamped on them. Each bat sells for $35 and has a variable cost of $22. There are $97,500 in fixed costs involved in the production process. a. Compute the break-eve..

  Sixplex apartment building and lives in one unit

Pedro owns a sixplex apartment building and lives in one unit. The building is insured under the Dwelling Property 1 (basic form) policy for $320,000. The replacement cost of the building is $400,000. Explain to what extent, if any, Pedro will recove..

  What actions can it take to be in compliance

If the Friendly National Bank experiences a required reserves deficit, what actions can it take to be in compliance with the existing required reserves ratio?

  Most investors discourage the distribution of dividends

The following are true about taxation on stocks: 1.Earnings by REITS are taxed at both the corporate level and at the taxpayer level. 2.Short-term capital gains and all dividends are always taxed at the same rate. 3.Increases in the market value of a..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd