A major tenet of finance is to match short-term assets with short-term borrowings and long-term assets with long-term borrowings.
Added by Clinton W.
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This principle states that companies should align their assets and liabilities based on their time horizons to ensure financial stability and liquidity. Show more…
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At the extreme, a firm that adheres to the conservative approach to finance current assets will finance all of its seasonal needs with long-term financing alternatives, thereby eliminating the need to use short-term financing. Such a firm will have extra permanent funds during off-peak periods, allowing it to store liquidity in the form of short-term investments during the off-season.
Jennifer S.
the firm's optional financial policy depends on the nature of the firm's assets its asset can be sold , the more feasible it is for the firm to use -term debt. consequently it is logical fr a firm to finance correct assets with -term debt and to finance fixed assets with -term debt
Luke H.
Which of the following would be consistent with a hedging (maturity matching) approach to financing working capital? a. Financing seasonal needs with long-term funds. b. Financing some long-term needs with short-term funds. c. Financing short-term needs with short-term funds. d. Financing short-term needs with long-term debt.
Jerelyn N.
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Principles of Accounting Volume 1: Financial Accounting
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