Short Term Financial Policies

1216 WordsFeb 15, 20115 Pages
PTMBA I / Trim III (A. Y. 2010-11) Div. C. Assets of Short Term Financial Policy Flexible Short Term Financial Policy Maintainance of high ratio of current assets to sales. This would include:- ❖ Keeping large cash & bank balances ❖ Making substantial investment in inventories. ❖ Liberal Credit Term meaning high level of debtors. Restrictive Short Term Financial Policy. This would include:- ❖ Low cash balances / no investment in marketable securities ❖ Small inventory level ❖ No credit on Sales & hence receivables at minimum Thus, flexible short-term financial policies are costly in that they require higher cash outflows to finance cash and marketable securities, inventory, and accounts receivable. However,…show more content…
They include both opportunity costs and the costs of maintaining the asset’s economic value. Shortage costs decrease with increases in the level of investment in current assets. They include trading coasts of running out of the current asset (e.g. being short of

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