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What are the current asset financing strategies that firms adopt? 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
reasonally 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. Description Some portion of fixed assets and the non seasonal
person of current assets are financed with long-term capital, and all seasonal needs if current
assets and the remaining portion of fixed assets are financed with short-term loans. Long-term
capital finances all permanent current assets and some temporary financing needs. All fixed
assets and the non seasonal portion of current assets are financed with long-term capital, and
sectional needs of current assets are financed with short-term loans.
Solution
I the scenario the some portion of the fixed assets as well as the non-seasonal portion of the
current assets are financed with long term capital and all seasonal needs if current assets and the
remaining portion of the fixed assets are financed with short term loans.
This is a case of conservative approach.
This is because long term capital is used to finance assets first.
Hence, the correct option is Conservative approach.

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What are the current asset financing strategies that firms adopt Fi.pdf

  • 1. What are the current asset financing strategies that firms adopt? 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 reasonally 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. Description Some portion of fixed assets and the non seasonal person of current assets are financed with long-term capital, and all seasonal needs if current assets and the remaining portion of fixed assets are financed with short-term loans. Long-term capital finances all permanent current assets and some temporary financing needs. All fixed assets and the non seasonal portion of current assets are financed with long-term capital, and sectional needs of current assets are financed with short-term loans. Solution I the scenario the some portion of the fixed assets as well as the non-seasonal portion of the current assets are financed with long term capital and all seasonal needs if current assets and the remaining portion of the fixed assets are financed with short term loans. This is a case of conservative approach. This is because long term capital is used to finance assets first. Hence, the correct option is Conservative approach.