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Which of the following working capital strategies is the most aggressive?

a) Making greater use of short term finance and maximizing net short term asset.

b) Making greater use of long term finance and minimizing net short term asset

c) Making greater use of short term finance and minimizing net short term asset.

d) Making greater use of long term finance and maximizing net short term asset

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Question added by Riaz Ahammed , Financial Accountant , UTC Climate Controls & Security
Date Posted: 2015/07/19
Deleted user
by Deleted user

"Making greater use of short term finance and minimizing net short term asset." is the most aggressive strategy, also known as 'riding the yield curve', but also yield the most return

 

If you borrow short term (cheaper than long term funds) and invest in long term assets for higher yields ( in other words minimise net short term asset). Due to high refinancing risk you may find yourself in a liquidity crisis.. 

 

Hershey Alvarez
by Hershey Alvarez , MLHUILLIER TAGUIG BRANCH , MLHUILLIER TAGUIG BRANCH

a.making greater use of short term finance and maximizing net short term asset

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