'These decisions affect the liquidity as well as profitability of a business.'
Which of the following decision is being referred to here?
Answer & explanation
Correct answer: option 1
The correct answer is option 1- Working capital decision.
Working capital decision is being referred in the given lines.
Short-term investment decisions (also called working capital decisions) are concerned with the decisions about the levels of cash, inventory and receivables. These decisions affect the day-to-day working of a business. These affect the liquidity as well as profitability of a business. Efficient cash management, inventory management and receivables management are essential ingredients of sound working capital management.