A firm that makes use of the extreme form of the conservative approach will finance all of its seasonal needs with long-term financing alternatives, 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.

Question

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A conservative approach involves using long-term financing for both permanent and temporary needs, leading to excess funds during off-peak times, which can be invested short-term.

A Firm That Makes Use of the Extreme Form of the Conservative