A conservative current operating asset financing approach will result in permanent current assets and some seasonal current assets being financed using long-term securities.

Question

Quizplus · Accepted Answer

Conservative current operating asset financing approach aims to ensure adequate funds are available to meet current operating expenses as well as some seasonal requirements. As a result, permanent current assets such as accounts receivable and inventory, as well as some seasonal current assets, will be financed using long-term securities such as bonds or preferred stock. This approach aims to minimize the risk of a shortage of funds to meet short-term obligations.

A Conservative Current Operating Asset Financing Approach Will Result in Permanent