Question
Discuss the following post with actual statement, if you are agree or disagree and why Working Capital Management Strategy Working capital management is the process
Discuss the following post with actual statement, if you are agree or disagree and why
Working Capital Management Strategy Working capital management is the process of keeping track of a company's short-term assets and debts to make sure it has enough money to run . A working capital management strategy has two major components: Management of current assets: This means making sure that a company's cash, accounts receivable, inventory, and other short-term assets are used in the best way possible. This involves strategies such as inventory control, credit policies, and cash management. Management of current liabilities: This involves managing a company's short-term debt obligations, such as accounts payable, accrued expenses, and short-term loans. Effective management of current liabilities can help a company optimize its cash flow and avoid cash shortages. A good strategy for managing working capital should try to find a balance between making sure there is enough cash and keeping costs as low as possible. It should also consider the company's business cycle, industry dynamics, and market conditions. Aggressive and Conservative Asset Mix Strategies Asset mix strategies are investment strategies that determine how a company's assets are allocated among different asset classes, such as stocks, bonds, and cash equivalents . Two common asset mix strategies are aggressive and conservative. Aggressive asset mix strategy The goal of an aggressive asset mix strategy is to maximize returns by investing a significant portion of assets in high-risk, high-return assets such as stocks. This strategy is good for companies that are willing to take on a lot of risk and plan to invest for a long time. Liquidity: Most aggressive asset mix strategies have low liquidity because they invest in assets that may not be easy to turn into cash. This can limit a company's ability to meet short-term cash needs. Risk: Aggressive asset mix strategies carry a high level of risk because they invest in high-risk assets. This can lead to significant losses if the market experiences a downturn. Conservative asset mix strategy The goal of a conservative asset mix strategy is to keep capital safe by investing in low-risk assets like bonds and cash equivalents. This strategy is good for companies that don't like taking risks and only want to invest for a short time. Liquidity: Most conservative asset mix strategies have high liquidity because they invest in assets that are easy to turn into cash . This can enable a company to meet short-term cash needs. Risk: Conservative asset mix strategies carry a low level of risk because they invest in low-risk assets. This can limit potential returns but also minimize the potential for significant losses.
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