Fundamentals of Financial Management, Concise Edition (MindTap Course List)
Fundamentals of Financial Management, Concise Edition (MindTap Course List)
9th Edition
ISBN: 9781305635937
Author: Eugene F. Brigham, Joel F. Houston
Publisher: Cengage Learning
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Chapter 15, Problem 6Q
Summary Introduction

To explain: The maturity matching approach and its difference from aggressive or conservative approach and the effect of this approach on profits and on risk and, the approach which is most suitable.

Introduction:

Current Assets:

Any asset, which can be reported in the form of cash within the duration of 1 financial year is classified as current assets.

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Students have asked these similar questions
What does it mean to adopt a maturity matching approach to financing assets, includingcurrent assets? How would a more aggressive or a more conservative approach differ fromthe maturity matching approach, and how would each affect expected profits and risk? Ingeneral, is one approach better than the others?
What are some advantages of matching the maturities of claims against assets with the lives of theassets financed by those claims? Is it feasible for afirm to match perfectly the maturities of all assetsand claims against assets? Why might a firm deliberately mismatch some asset and claim maturities?
Which of the following statements describing the elements of intrinsic valuation is most accurate? A.) When the present value of the cashflows is discounted with the appropriate rate and this present value is positive, then the asset providing these cashflows has a value to the investor. B.) The risk-free rate is the lowest rate that an investor can earn from short-term investments. C.) Cashflows may include depreciation expenses and amortization costs. D.) A simple calculation of present values of expected cashflows of different investments using the risk free rate would be enough to determine which asset is best.
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