00:01
Okay, so i see that you need help with this question and it says, what are the current assets financing strategies that firms adopt? so they can be spontaneous financing.
00:34
This strategy involves the use of trade credits and accrued expenses.
00:49
It is called spontaneous as it arises in the normal course of business.
00:55
The firm does not have any, have to make any special efforts to secure this type of financing.
01:02
There is short -term financing.
01:12
This strategy involves the use of short -term funds for financing current assets.
01:25
The firm can use bank loans, commercial paper, or other short -term borrowings.
01:40
This strategy is more flexible but also more expensive than spontaneous financing.
01:47
There is long -term financing.
01:54
This strategy involves the use of long -term funds for financing, current assets.
02:11
The firm can use equine.
02:13
Long -term loans and retained earnings.
02:16
This strategy is less flexible, but also less expensive than short -term financing.
02:27
Number four is matching financing.
02:36
This strategy involves matching the maturity of the assets with the maturity of the liabilities.
02:58
For example, if a firm has current assets that are expected to be converted into cash within a year.
03:08
It would use short -term financing to finance these assets, conservative financing.
03:20
This strategy involves financing all current assets and a part of fixed assets with long -term funds.
03:48
The remain fixed assets are financed with short -term funds.
03:53
This strategy is considered conservative because it reduces the risk of liquidity problems.
03:59
There is aggressive financing.
04:06
This strategy involves financing a part of current assets and with short -term funds...