Question

which of the following is a goal of working capital management?

to ensure that the maturity of current liabilities is less than the life expectancy of current assets

to set inventory at a level that meets demand but minimizes inventory costs

to replace credit transactions with cash transactions

to lengthen the net operating cycle as much as possible

Explanation:

• Analyze each option:
• First option: Maturity of current liabilities vs. life of current assets is not a core working capital (WC) goal. WC focuses on managing short - term assets/liabilities, not this specific maturity - life comparison.
• Second option: Inventory management is a key part of WC management. Balancing inventory to meet demand and minimize costs (like holding, ordering costs) is a primary goal, as inventory is a current asset.
• Third option: Replacing credit with cash transactions is not a WC goal. Credit management (like accounts receivable) is part of WC, but eliminating credit isn't the aim.
• Fourth option: Lengthening the net operating cycle (time to convert inventory to cash) is not a goal. Shorter cycles are better for liquidity, so lengthening is not desired.

Answer:

To set inventory at a level that meets demand but minimizes inventory costs