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When organizations decide to finance assets, the key is to match meaning current assets with current...

When organizations decide to finance assets, the key is to match meaning current assets with current financing and long-term assets with long-term financing. What would be an example of this occurring in business today and what would be the disadvantage from not matching?

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Example of this occurring today is that Current asset like Working Capital Requirement is financed by short-term loans whereas long-term asset such as Building is financed with the help of long-term loans.

The disadvantage in case this does not happen is that it would put a constraint on the profitability of any firm because you would need to pay principal along with interest in a short period of time, whereas you the asset would generate sufficient cash flows over a longer period of time. This would become a classic example of asset-liability mis-match.

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