Assignmen Supply Chains and Working Capital Management 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 Long-term Financing Asset Requirements TIME Which of the following best characterizes this firm's policy of financing assets? Restricted policy O Relaxed policy Moderate policy Note the shaded region on the preceding graph. Which of the following statements best describes the firm's situation during this time? 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 Considering all else remains constant, if a firm is using a restricted policy of financing assets, it will have a assets turnover ratio, and consequently, a return on equity What are the current asset financing strategles 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. All fixed assets and the nonseasonal portion of current assets, as well as seasonal needs of current assets, are financed with long-term capital. Which current asset financing policy is consistent with this statement? Aggressive approach Conservative approach Maturity matching 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? Maturity matching approach Aggressive approach Conservative approach All Nixed 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? O Maturity matching approach O Aggressive approach O Conservative 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? O Aggressive approach Maturity matching approach Conservative approach Save & Continue
