Which one of the following is a working capital decision?

Which one of the following is a working capital decision?

A. How should the firm raise additional capital to fund its expansion?

B. What debt-equity ratio is best suited to the firm?

C. What is the cost of debt financing?

D. Which type of debt is best suited to finance the inventory?

E. How much cash should the firm keep in reserve?

Answer: D. Which type of debt is best suited to finance the inventory?

The working capital decisions involve the administration of the short-term assets and open current liabilities, that is money, bills receivable, inventory, bills payable and other short- terms assets and responsibilities. While the main question of debt financing type to be chosen for securing investment in inventories is the part of the short-term debt management. In accounting as an asset, firms use short-run credit lines like credit cards and commercial paper to obtain necessary capital for their inventory. Debt selection using the right type of loan with suitable maturity, interest rate, and repayment terms is as good as money. Along with good use of debt, sufficient funds to meet the firm’s short-term obligations can be achieved.