Question

What are the current asset financing strategies that firms adopt? Firms manage a variety of current...

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 seasonally or with business cycles. Each firm must devise a financing strategy that best fits its business situation and best manages its risk.

Long-term capital finances all permanent current assets and some temporary financing needs. Which current asset financing policy is consistent with this statement?

Aggressive approach

Maturity matching approach

Conservative approach

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. Which current asset financing policy is consistent with this statement?

Conservative approach

Aggressive approach

Maturity matching approach

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. Which current asset financing policy is consistent with this statement?

Aggressive approach

Conservative approach

Maturity matching approach

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Funding both the seasonal and permanent asset requirements with short-term sources ____ Is the principle behind...
Funding both the seasonal and permanent asset requirements with short-term sources ____ Is the principle behind the maturity matching working capital policy Represents a conservative working capital policy Is the financing approach of an aggressive working capital policy Is an example of the self-liquidity approach
Guardian Inc. is trying to develop an asset-financing plan. The firm has $480,000 in temporary current...
Guardian Inc. is trying to develop an asset-financing plan. The firm has $480,000 in temporary current assets and $380,000 in permanent current assets. Guardian also has $580,000 in fixed assets. Assume a tax rate of 40 percent. a. Construct two alternative financing plans for Guardian. One of the plans should be conservative, with 60 percent of assets financed by long-term sources, and the other should be aggressive, with only 56.25 percent of assets financed by long-term sources. The current interest...
Medical Equipment of Orlando Inc. trying to develop an asset-financing plan. The firm has $2,800,000 in...
Medical Equipment of Orlando Inc. trying to develop an asset-financing plan. The firm has $2,800,000 in temporary current assets and $1,200,000 in permanent current assets. The company also has $6,000,000 in fixed assets. Part A Construct two alternative financing plans for Medical of Orlando Inc. One of the plans should be conservative, with 80 percent of assets financed by long-term sources and the rest financed by short-term sources. The other plan should be aggressive, with only 20 percent of assets...
Which one of the following statements is NOT true? a. Long-term financing strategy relies on long-term...
Which one of the following statements is NOT true? a. Long-term financing strategy relies on long-term debt to finance both capital assets and working capital. b. Companies using a matching maturity strategy fund all working capital needs with short-term borrowing. c. All working capital and a portion of fixed assets are funded with short-term debt when companies use the aggressive funding strategy. d. Companies using matching maturity strategy fund all working capital needs with long-term borrowing.
How do you figure out what Conservative and Aggressive amounts will be? I can not ind...
How do you figure out what Conservative and Aggressive amounts will be? I can not ind anythng in my tet book that delves into this enough. Thank you. Guardian Inc. is trying to develop an asset-financing plan. The firm has $400,000 in temporary current assets and $300,000 in permanent current assets. Guardian also has $500,000 in fixed assets. Assume a tax rate of 40 percent. a. Construct two alternative financing plans for the firm. One of the plans should be...
Which of the following statements is correct? Group of answer choices If carrying costs dominate shortage...
Which of the following statements is correct? Group of answer choices If carrying costs dominate shortage costs, the firm will need to move toward a more flexible policy. Under the restrictive current asset management strategy, the current assets are kept at a minimum. The downside of restrictive current asset management strategy is the high carrying cost associated with owning a high level of inventory and providing liberal credit terms to customers. With the maturity matching strategy, all seasonal working capital...
Colter Steel has $4,800,000 in assets.    Temporary current assets $ 1,600,000 Permanent current assets 1,530,000...
Colter Steel has $4,800,000 in assets.    Temporary current assets $ 1,600,000 Permanent current assets 1,530,000 Fixed assets 1,670,000 Total assets $ 4,800,000 Short-term rates are 12 percent. Long-term rates are 17 percent. Earnings before interest and taxes are $1,020,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?   
Colter Steel has $5,250,000 in assets. Temporary current assets $ 2,500,000 Permanent current assets 1,575,000 Fixed...
Colter Steel has $5,250,000 in assets. Temporary current assets $ 2,500,000 Permanent current assets 1,575,000 Fixed assets 1,175,000 Total assets $ 5,250,000 Short-term rates are 9 percent. Long-term rates are 14 percent. Earnings before interest and taxes are $1,110,000. The tax rate is 40 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?
Colter Steel has $5,150,000 in assets. Temporary Current Assets: $2,300,000 Permanent Current Assets: 1,565,000 Fixed Assets:...
Colter Steel has $5,150,000 in assets. Temporary Current Assets: $2,300,000 Permanent Current Assets: 1,565,000 Fixed Assets: 1,285,000 Total Assets: 5,150,000 Short-term rates are 7 percent. Long-term rates are 12 percent. Earnings before interest and taxes are $1,090,000. The tax rate is 20 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?
Colter Steel has $5,150,000 in assets.    Temporary current assets $ 2,300,000 Permanent current assets 1,565,000...
Colter Steel has $5,150,000 in assets.    Temporary current assets $ 2,300,000 Permanent current assets 1,565,000 Fixed assets 1,285,000 Total assets $ 5,150,000 Short-term rates are 7 percent. Long-term rates are 12 percent. Earnings before interest and taxes are $1,090,000. The tax rate is 20 percent. If long-term financing is perfectly matched (synchronized) with long-term asset needs, and the same is true of short-term financing, what will earnings after taxes be?    Earnings after taxes?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT