Скачать или смотреть Financial Management # Working Capital Management * Approaches to working capital financing

Working capital is actually the operating liquidity of the business needed to meet the day to day operations. For financing various types of working capital, there are mainly three approaches namely Matching approach, Conservative approach and Aggressive approach.

Matching approach is otherwise known as hedging approache. Here the type of working capital and type of sources of funds used to finance is matching.

Conservative approach can be adopted by the firm which needs more liquidity, but only less profitability. This is a risk free approach as the major parts of working capital is financing through long term sources of funds.

Aggressive approach is on the other hand high risk plan of action of the business as the short term financing is using not only to meet temporary assets but also for a part of permanent assets.

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