A firm that follows an aggressive current asset financing approach uses primarily short-term credit and thus is more exposed to an unexpected increase in interest rates than is a firm that uses long-term capital and thus follows a conservative financing policy.

Question

Quizplus · Accepted Answer

An aggressive current asset financing approach involves using primarily short-term credit, which means the firm is more exposed to an unexpected increase in interest rates. In contrast, a conservative financing policy involves using long-term capital, which reduces the firm's exposure to interest rate risk.

A Firm That Follows an Aggressive Current Asset Financing Approach