Question

which of the following is a goal of working capital management?
to eliminate the risk of customers defaulting on credit
to make long-term capital investment decisions
to balance the cash conversion cycle against maximum revenue
to lessen free working capital and maximize opportunity costs

Explanation:

1. Analyze Option 1: Eliminating credit default risk is not a goal of working capital management (WCM); WCM deals with short - term assets/liabilities, not eliminating this risk entirely.
2. Analyze Option 2: Long - term capital investment decisions are part of capital budgeting, not WCM (WCM focuses on short - term).
3. Analyze Option 3: Working capital management aims to balance the cash conversion cycle (relating to short - term cash flow) with revenue generation. Managing the cash conversion cycle (time to convert inventory/receivables to cash) while maximizing revenue is a key goal of WCM.
4. Analyze Option 4: WCM aims to optimize working capital, not lessen free working capital and maximize opportunity costs (opportunity costs from idle capital should be minimized, not maximized).

Answer:

To balance the cash conversion cycle against maximum revenue