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 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. Aggressive approach Conservative approach Maturity matching approach

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...

See similar textbooks

Related questions

Question

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 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.

Aggressive approach

Conservative approach

Maturity matching approach

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.