FXAplia Grades Apla Access-NNA3000. A-? × Asia Student Question ure https m 1533

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FXAplia Grades Apla Access-NNA3000. A-? × Asia Student Question ure https m 153325703 3. Current asset financing policies How do firms finance their operating current assets? A firm's asset or capizal recuirements grow over time and usually exhibit temporal (seasonal) variation. Firns must so've the chati enge of how to finance the'r assets with a combination of short and lng-term Enancing. The folowing g graph exhibits this relationship for a part cular E TIME Which of the following best characterizes this firm's policy of fnancing assets? O Conservative pollicy O Moderate policy O Aggressive polcy Note the shaded region on the preceding graph. Which of the folowing statements best describes the frm's stuation during this time? O The firm must rely on short-berm borowing. O The fem has excess capitail to invest in cash or marketable securibes

Explanation / Answer

Hello

a) The firm is following Moderate Policy of financing Assets.

If the firm had just financed the lowest Asset Requirement using Long term Financing, it would have followed Aggresive Approach and if it has financed the highest, it would have followed Conservative. But, here, firm has used the modderate Approach.

b) Option 2 is Correct.

In the shaded region, Long Term Financing is more than the Asset Requirements for that time.

Hence, the firm has a excess capital to invest in cash or marketable securities.

I hope this clears your doubt.

Feel free to comment if you still have any doubt.

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