Firms manage a variety of current assets. Permanent current assets are needed for the firm to maintain its business, and they will be carried even through downturns in business cycles. Temporary current assets fluctuate seasonally or with business cycles. Each firm must devise a financing strategy that best fits its business situation and best manages its risk. Use the following table to identify the different current asset financing policies. A. Long-term capital finances all permanent current assets and some temporary financing needs. Aggressive approach Maturity matching approach Conservative approach B. Long-term capital finances all permanent assets, but short-term debt finances temporary current assets. Aggressive approach Maturity matching approach Conservative approach C. Some portion of fixed assets and the nonseasonal portion of current assets are financed with long-term capital, and all seasonal needs of current assets and the remaining portion of fixed assets are financed with short-term loans. Conservative approach Maturity matching approach Aggressive approach
Firms manage a variety of current assets. Permanent current assets are needed for the firm to maintain its business, and they will be carried even through downturns in business cycles. Temporary current assets fluctuate seasonally or with business cycles. Each firm must devise a financing strategy that best fits its business situation and best manages its risk. Use the following table to identify the different current asset financing policies. A. Long-term capital finances all permanent current assets and some temporary financing needs. Aggressive approach Maturity matching approach Conservative approach B. Long-term capital finances all permanent assets, but short-term debt finances temporary current assets. Aggressive approach Maturity matching approach Conservative approach C. Some portion of fixed assets and the nonseasonal portion of current assets are financed with long-term capital, and all seasonal needs of current assets and the remaining portion of fixed assets are financed with short-term loans. Conservative approach Maturity matching approach Aggressive approach
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Firms manage a variety of current assets. Permanent current assets are needed for the firm to maintain its business, and they will be carried even through downturns in business cycles. Temporary current assets fluctuate seasonally or with business cycles. Each firm must devise a financing strategy that best fits its business situation and best manages its risk.
Use the following table to identify the different current asset financing policies.
A. Long-term capital finances all permanent current assets and some temporary financing needs.
Aggressive approach
Maturity matching approach
Conservative approach
B. Long-term capital finances all permanent assets, but short-term debt finances temporary current assets.
Aggressive approach
Maturity matching approach
Conservative approach
C. Some portion of fixed assets and the nonseasonal portion of current assets are financed with long-term capital, and all seasonal needs of current assets and the remaining portion of fixed assets are financed with short-term loans.
Conservative approach
Maturity matching approach
Aggressive approach
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