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 means that a firm is limiting its current assets such as inventory, accounts receivable, and cash to reduce the risk of facing a cash-out situation. This policy can lead to a lack of inventory on hand, causing the firm to lose sales (I), and a higher probability of facing a cash-out situation (III). However, it may not increase the sales of a firm due to limited credit availability and terms (II). It also may not increase the firm's ability to charge premium prices (IV) as premium pricing depends on the market demand for the product or service.

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