The maturity matching, or "self-liquidating," approach to financing involves obtaining the funds for permanent current assets with a combination of long-term capital and short-term capital that varies depending on the level of interest rates.When short-term rates are relatively high, short-term assets will be financed with long-term debt to reduce costs.

Question

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The maturity matching, or "self-liquidating," approach to financing involves matching the maturity of the assets being financed with the maturity of the financing. So, permanent current assets would typically be financed with long-term capital, and short-term assets would be financed with short-term capital, regardless of the level of interest rates.

The Maturity Matching, or "Self-Liquidating," Approach to Financing Involves Obtaining