Which policy generally represents a more aggressive approach to working capital financing?
Correct answer: C. Financing some permanent current assets with short-term funds
- A. Financing permanent assets with long-term funds
- B. Holding large cash balances throughout the year
- C. Financing some permanent current assets with short-term funds
- D. Matching every asset with equity finance
Explanation
An aggressive financing policy uses more short-term finance, sometimes funding part of permanent current assets with short-term liabilities. This may reduce financing cost but increases refinancing and liquidity risk.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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