The temporary or variable current assets are financed with short-term funds and their level increases. The level of short-term financing also increases. Under matching plan, no short-term financing will be used if the firm has a fixed current assets need only.

Which of the following is a conservative approach to financing working capital?

3. Which of the following would be consistent with a conservative approach to financing working capital? Your Answer: Financing short-term needs with short-term funds. Correct Answer: Financing short-term needs with long-term debt.

What are the 3 approaches in current asset financing policy?

There are three strategies or approaches or methods of working capital financing – Maturity Matching (Hedging), Conservative and Aggressive.

What are three financial approaches?

There are basically three approaches to financing working capital. These are: the Hedging approach, the Conservative approach and the Aggressive approach.

What is the cheapest source of financing current assets?

Shareholders funds refer to equity capital and retained earnings. Borrowed funds refer to finance raised as debentures or other forms of debt. Retained earnings are the part of funds which are available within the business and is hence a cheaper source of finance.

What is a financing approach?

Financing is the process of providing funds for business activities, making purchases, or investing. Financial institutions, such as banks, are in the business of providing capital to businesses, consumers, and investors to help them achieve their goals.

What do you mean by conservative approach?

Conservative approach is a risk-free strategy of working capital financing. The major part of the working capital is financed by the long-term sources of funds such as equity, debentures, term loans etc. So, the risk associated with short-term financing is abolished to a great extent.

What is the difference between aggressive and conservative approach?

An aggressive policy means spending as much as possible to churn out products, move inventory and deliver services. With a conservative approach, money is being saved, and your business is buffered, somewhat, against risk.

What are three alternative current asset financing policies is one best?

The three asset financing policies are the Maturity matching approach, the aggressive approach and the conservative approach.

What are the two approaches of financial management?

Theoretical points of view, financial management approach may be broadly divided into two major parts. Traditional Approach, Modern Approach. Theoretical points of view, financial management approach may be broadly divided into two major parts.