- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 4. Working Capital and Liquidity
- Subject 3. Managing Working Capital and Liquidity
CFA Practice Question
A firm that successfully employs a ______ short-term financial policy will probably decrease its risk of default and/or inventory stock-outs.
B. restrictive
C. just-in-time
A. flexible
B. restrictive
C. just-in-time
Correct Answer: A
A restrictive short-term financial policy increases the risk of default and/or inventory stock-outs.
User Contributed Comments 3
| User | Comment |
|---|---|
| weic08 | what is the effects of just-in-time policy? |
| rhardin | Dell Computers uses a just-in-time policy... when you order a computer, it's not just sitting in a warehouse waiting to be ordered and sent. Instead, they build it IF they get an order for it. It exposes the company to possible "stockouts" because too many orders may come in at one time and overload the factory. However, it also means no capital tied up in inventory that is just sitting around so it is free for other uses. So it's good in some ways, bad in others. Hope that helps! |
| essoh | very helpfull |