CFA Level I · CFA Level I Exam · Working Capital and Liquidity
A company's investment policy statement for short-term funds most likely includes which of the following elements?
The policy most likely specifies permitted instruments, credit quality limits and maturity limits. These guidelines control risk and liquidity in the short-term portfolio, alongside the purpose, authorized personnel and reporting, while capital budgets and dividend targets are outside its scope.
- AForecasts of the firm's long-term capital budget
- BPermitted instruments, credit quality limits and maturity limitsCorrect
- CThe target dividend payout ratio for the next five years
Explanation
A written short-term investment policy sets purpose, authority, and guidelines such as acceptable instruments, issuer credit quality, diversification and maturity limits, plus reporting. Capital budgets and dividend targets belong to other financial policies.
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