Which financial policy, or policies, uses both marketable securities and short-term financing to fund seasonal variations in asset needs? - Both the flexible and the compromise financial policies - Compromise financial policy only - Restrictive financial policy only - Flexible financial policy only - Both the restrictive and the compromise financial policies

Flexible financial policy only- CORRECT option

Flexible financial policies include:

a)Keeping large balances of cash and marketable securities.

b)Making large investments in inventory.

c)Granting liberal credit terms which results in a high level of accounts receivable.

Both the flexible and the compromise financial policies - INCORRECT option

With a compromise policy, the firm keeps a reserve of liquidity which it uses to initially finance seasonal variations in current asset needs. Short-term borrowing is used when the reserve is exhausted. So both policies can't be used together.

Compromise financial policy only- INCORRECT option

With a compromise policy, the firm keeps a reserve of liquidity which it uses to initially finance seasonal variations in current asset needs. Short-term borrowing is used when the reserve is exhausted.

Restrictive financial policy only- INCORRECT option

Restrictive short-term financial policies are

a)Keeping low cash balances and no investment in marketable securities.

b)Making small investments in inventory.

c)Allowing no credit sales and no accounts receivable.

Both the restrictive and the compromise financial policies- INCORRECT option

Both type of policies can't be used together as both are opposite of each other.