A restrictive short-term ﬁnancial policy, as compared to a more ﬂexible policy, tends to: I.cause a ﬁrm to lose sales due to a lack of inventory on hand.
II)increase the sales of a ﬁrm due to the ﬁrm's credit availability and terms.
III)increase the probability that a ﬁrm will face a cash-out situation.
IV)increase the ability of a ﬁrm to charge premium prices.
A)I and III only.
B)II and IV only.
C)I and IV only.
D)II and III only.
E)I and II only.

Question

Quizplus · Accepted Answer

A restrictive short-term financial policy may lead to a lack of inventory on hand, resulting in the loss of potential sales. This is captured by option I. Restrictive financial policies may also increase the probability of facing a cash-out situation as cash is tightly managed, hence option III is correct. However, option II and IV do not seem to be valid implications of a restrictive financial policy.

A Restrictive Short-Term ﬁNancial Policy, as Compared to a More