Firms manage a variety of current assets. Permanent current assets are necessary for firms to maintain their businesses, and they will be carried even through downturns in business cycles. Temporary current assets fluctuate seasonally or with business cycles. Firms must devise a financing strategy that best fits their business situation and that best manages their risk. Use the following table to identify the different current asset financing policies. Financing Policy Description This current asset financing policy tends to be the safest current asset financing policy; however, it also tends to be less profitable than the other policies. Long-term capital finances some permanent current assets, but short-term debt finances all temporary current assets and the remaining permanent current assets. Long-term capital finances all permanent assets, but short-term debt finances temporary current assets. Why does the conservative approach tend to be less profitable than the other current asset financing policy approaches? Short-term debt is usually cheaper than long-term debt. O All current asset financing approaches have the same potential profitability. O Taking out long-term debt tends to be more profitable than taking out short-term debt