Type your question here Answer A company should hold a relatively large amount o
ID: 2702368 • Letter: T
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A company should hold a relatively large amount of cash or marketable securities, or have an adequate line of credit, if its sales tend to fluctuate in an uncertain manner. Because credit policy influences both sales and the average collection period, its credit policy affects a firm's working capital position. The cash budget is useful when estimating a firm's financing needs during the budget period. Carrying very low inventories reduces inventory carrying costs, but low inventories can result in lost sales and production stoppages. Working capital involves only current assets and current liabilities, hence a firm's working capital policy plays no role in capital budgeting decisions.Explanation / Answer
Working capital involves only current assets and current liabilities, hence a firm's working capital policy plays no role in capital budgeting decisions
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