A. A conservative working capital policy would want its short-term investments to be more liquid so that there is less risk related to the conversion of those investments into cash. This would cause them to make more investments in marketable securities and less in common stock.
B. If the company becomes more conservative in their working capital policy, they will hold more current assets than before. This would cause the ratio of current assets to units of output to increase.
C. If the company becomes more conservative in their working capital policy, they will hold more current assets than before. This would cause the acid-test ratio to increase.
D. A more conservative working capital policy would use more long-term financing than short-term financing. Therefore, this ratio would decrease with a conservative working capital policy.
