As per which one of the following approaches, a firm finances a part of its permanent working capital…
In working capital financing policy, under the 'Aggressive Approach' a firm finances not only all of its temporary (fluctuating) working capital but also a portion of its…
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As per which one of the following approaches, a firm finances a part of its permanent working capital with short term financing?
Answer and explanation
Correct answer C
In working capital financing policy, under the 'Aggressive Approach' a firm finances not only all of its temporary (fluctuating) working capital but also a portion of its permanent working capital using short-term financing sources. While this lowers financing costs and raises expected profitability, it exposes the firm to higher refinancing and liquidity risk.
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UGC NET Commerce