The purpose of managing current assets and current liabilities is to ________.
A) achieve a balance between short-term and long-term financing of a firm
B) achieve as low a level of current liabilities as possible
C) achieve a balance between profitability and risk that contributes to a firm's value
D) achieve as high a level of current liabilities as possible

Question

Quizplus · Accepted Answer

The purpose of managing current assets and current liabilities is to achieve a balance between profitability and risk that contributes to a firm's value. This involves optimizing the level of current assets and liabilities to ensure that the firm can meet its short-term obligations while maximizing profit potential. Simply achieving a balance between short-term and long-term financing (choice A) or aiming for the lowest level of current liabilities (choice B) may not necessarily lead to optimal profitability and value creation. Additionally, aiming for the highest level of current liabilities (choice D) can increase risk and may not reflect a balanced approach.

The Purpose of Managing Current Assets and Current Liabilities Is