CFA Practice Question

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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.

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
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