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Hello sir, could you please look at this question.. I think here 1. Conservative 2. Aggressive, but the book marks both of them as aggressive. Could you please clarify this for me?
A company can make decisions that affect its level of investment in working capital. These can be described as either aggressive or conservative policies.
Indicate, by clicking in the relevant boxes, whether the following policies are aggressive or conservative.
1. Holding high levels of inventory to avoid long lead times for its customers
2. Delay paying creditors (payables) for as long as possibleI am afraid I disagree
Holding high levels of inventory to avoid long lead times for its customers – policy is considered conservative.
Maintaining high inventory levels ensures that the company can meet customer demand promptly, which aligns with a conservative approach focused on liquidity and stability.
Delay paying creditors (payables) for as long as possible – policy is considered aggressive.
Delaying payments to creditors allows the company to retain cash for longer periods, which can enhance short-term profitability but may pose risks to supplier relationships and long-term liquidity.
In summary, the first policy is conservative, while the second is aggressive.
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