Reading 46: Working Capital Management - LOS e, (Part 2) policy, include, function, management, investment

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1.An investment policy statement for a firm’s short-term cash management function would least appropriately include:

A)   information on who is allowed to invest corporate cash.

B)   procedures to follow if the investment guidelines are violated.

C)   limits on the proportion of the portfolio which can be invested in each permitted security type.

D)   a list of permissible securities.

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答案和详解如下：

1.An investment policy statement for a firm’s short-term cash management function would least appropriately include:

A)   information on who is allowed to invest corporate cash.

B)   procedures to follow if the investment guidelines are violated.

C)   limits on the proportion of the portfolio which can be invested in each permitted security type.

D)   a list of permissible securities.

The correct answer was D)

An investment policy statement typically begins with a statement of the purpose and objective of the investment portfolio, some general guidelines about the strategy to be employed to achieve those objectives, and the types of securities that will be used. A list of permitted securities for investment would be limited and likely too restrictive. A list of permitted security types is appropriate and can provide the necessary flexibility to increase yield within the safety and liquidity constraints appropriate for the firm.

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