Which of the following is a key focus of working capital management?

The key focus of working capital management is indeed establishing credit terms. This aspect is crucial because working capital management involves managing the short-term assets and liabilities of a business to ensure that it can continue its operations and meet its short-term financial obligations.

Establishing credit terms directly affects cash flow by determining how and when customers are required to pay for goods and services. Effective credit policies can help optimize sales and manage the collection of accounts receivable, which in turn impacts the available working capital. This ensures that a company has sufficient liquidity to cover day-to-day operations and unexpected expenses.

In contrast, increasing fixed asset purchases is more relevant to long-term investment strategies and typically falls outside the scope of working capital management, which focuses on the short-term operational needs of the business. Assessing long-term investments pertains to capital budgeting, which is distinct from managing working capital. Reducing total liabilities may be beneficial for overall financial health, but it does not specifically target the efficient management of working capital, which is primarily concerned with controlling short-term assets and liabilities.