Question

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.

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Answer #1

The statement that is Not true :-

(d) companies with matching maturity strategy fund all working capital need with long term borrowing.

Explanation :-

In case of maturity matching strategy , capital asset or long term asset are funded with long term borrowing and short term asset or working capital needs are financed by short term borrowing.

And the other financing strategies are :-

Aggressive financing strategy is the strategy in which all working capital needs and a portion of fixed asset are funded with short term debt .This is a risk taking strategy.

Conservative financing strategy or long term financing strategy is the strategy in which long term debt is used to finance both capital asset or fixed asset and working capital . It is a strategy to avoid risk.

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