CS Executive · Corporate Accounting and Financial Management · Working Capital Management
A firm follows an aggressive working capital financing policy. Which feature does this policy have?
An aggressive policy finances part of permanent current assets with short-term funds. This lowers financing cost but raises liquidity and refinancing risk, unlike a conservative policy which relies on long-term funds.
- APart of permanent current assets is financed by short-term fundsCorrect
- BAll current assets are financed by long-term funds
- CTemporary current assets are financed by equity only
- DNo short-term borrowing is used
Explanation
An aggressive policy uses short-term funds even for part of permanent current assets, raising risk and expected return. A conservative policy uses long-term funds for them.
Did you get it right without looking?
One question tells you little. A timed set on Working Capital Management shows your real accuracy, how long you take and where you lose marks.
More Working Capital Management questions
- In working capital management, 'net working capital' is best described as:
- Which of the following is a feature of permanent (fixed) working capital as distinct from temporary (variable) working capital?
- Sharma Textiles has permanent current assets of Rs 40 lakh and fluctuating current assets that peak at Rs 25 lakh. It follows an aggressive …
- Aarav Traders has raw material holding period of 30 days, work-in-progress period of 10 days, finished goods holding period of 20 days, and …
- Mehta Traders has annual credit sales of Rs 36,00,000 and allows customers 60 days credit. Assuming a 360-day year and that all customers pa…
- Which of the following is a technique used to speed up the collection of cash from customers?