1. Current asset financing policies How do firms finance their operating current assets? A firm's asset or capital requirements grow over time and usually exhibit temporal (seasonal) variation. Firms must solve the challenge of how to finance their assets with a combination of short- and long-term financing. The following graph exhibits this relationship for a particular firm. DOLLARS Asset Requirements Long-term Financing TIME Which of the following best characterizes this firm's policy of financing assets? O Restricted policy O Moderate policy Relaxed policy Note the shaded region on the preceding graph. Which of the following statements best describes the firm's situation during this time? O The firm must rely on short-term borrowing, The firm has excess capital to invest in cash or marketable securities. The impact of working capital management on return on equity level of assets, a assets Considering all else remains constant, if a firm is using a restricted policy of financing assets, it will have a turnover ratio, and consequently, a return on equity