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. In the following table identify the different current asset financing policies. Financing Policy Description All fxed assets, the permanent portion of current assets, and a portion of the temporary component of current assets are covered by long-term debt. The remaining portion of temporary current assets is Aggressive approach covered by short-term financing. Aggressive approach Conservative approach Long-term capital finances al permanent assets, but short-term debt finances temporary current assets Maturity matching approach Some portion of foxed assets and the permanent portion of current assets are financed with long-term capital, and all temporary needs of current assets and the remaining portion of faxed assets are fnanged with short-term loans

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. In the following table identify the different current asset financing policies. Financing Policy Description All fxed assets, the permanent portion of current assets, and a portion of the temporary component of current assets are covered by long-term debt. The remaining portion of temporary current assets is Aggressive approach covered by short-term financing. Aggressive approach Conservative approach Long-term capital finances al permanent assets, but short-term debt finances temporary current assets Maturity matching approach Some portion of foxed assets and the permanent portion of current assets are financed with long-term capital, and all temporary needs of current assets and the remaining portion of faxed assets are fnanged with short-term loans

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter2: Asset And Liability Valuation And Income Recognition

Section: Chapter Questions

Problem 8QE

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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…
What are the current asset financing strategies that firms adopt? a. 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. Long-term capital finances all permanent current assets and some temporary financing needs. Conservative approach Maturity matching approach Aggressive approach b. All fixed assets and the nonseasonal portion of current assets are financed with long-term capital, and seasonal needs of current assets are financed with short-term loans. Conservative approach Aggressive approach Maturity matching approach c. Some…
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. All fixed assets and the nonseasonal portion of current assets, as well as seasonal needs of current assets, are financed with long-term capital. Maturity matching approach Conservative approach Aggressive approach All fixed assets and the nonseasonal portion of current assets are financed with long-term capital, and seasonal needs of current assets are financed with short-term loans. Aggressive approach Maturity matching approach Conservative approach Some portion of fixed assets and the…
In the aggressive approach to current asset financing, a. fixed assets and permanent current assets of a firm are financed with short-term nonspontaneous sources of funds b.all of the fixed assets and permanent current assets are financed with long-term sources of funds c.fixed assets of a firm are financed with long-term capital, but some of the firm's permanent current assets are financed with short-term sources of funds. d.fixed assets of a firm are financed with short-term nonspontaneous sources of funds, but some of the firm's permanent current assets are financed with long-term capital
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Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets, or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions: a. What are the possible advantages of leasing the assets instead of owning them? b. What are the possible disadvantages of leasing the assets instead of owning them? c. How will the balance sheet be different if Bradley Co. leases the assets rather than purchasing them?
Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program.After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions: (a) What might be the advantages of leasing the assetsinstead of owning them?(b) What might be the disadvantages of leasing the assets instead of owning them?(c) In what way will the balance sheet be differently affected by leasing the assets as opposed to issuing bonds and purchasing the assets?
The entity has several high-cost.non-profitgenerating assets. It also has:avcost of debt and equity significantly higher than the industry average. In creating and executing a financial policy, the financial manager may do the following EXCEPT: a. Suggest a cost-benefit analysis using capital budgeting techniques on the non-profit-generating assets.b. Request for a more conservative investing and financing policy.c. Determine the cause of the high cost of financing.d. Determine whether these non-profit-generating assets be sold and be used to purchase other non-operating assets that can provide a return higher than the cost to finance these.
Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease the assets on a long-term basis. Without knowing the comparative costs involved, answer these questions: a. What might be the advantages of leasing the assets instead of owning them? b. What might be the disadvantages of leasing the assets instead of owning them? c. In what ways will the Statement of Financial Position be differently affected by leasing the assets as opposed to issuing bonds and purchasing the assets?