Fundamentals of Financial Management (Concise 6th Edition)

Chapter 15 Working Capital Management 477

Alternative Current Asset Financing Policies
F I G U R E 1 5! 2

1 2 3 4 5 6 7 8

Temporary

Current Assets

Total

Permanent

Assets

Dollars

Temporary

Current Assets

Long-Term

Debt plus Equity

plus Spontaneous

Current Liabilities

Short-Term,

Nonspontaneous Debt

Financing

a. Moderate Approach (Maturity Matching)

Time Period

1 2 3 4 5 6 7 8

Dollars

Temporary

Current Assets

Long-Term

Debt plus Equity

plus Spontaneous

Current Liabilities

Short-Term,

Nonspontaneous Debt

Financing

b. Relatively Aggressive Approach

Time Period

1 2 3 4 5 6 7 8

Dollars Marketable

Securities

Long-Term

Debt plus Equity

plus Spontaneous

Current Liabilities

Short-Term Financing

Requirements

c. Conservative Approach

Time Period

Fixed Assets

Permanent Level

of Current Assets

Fixed Assets

Permanent Level

of Current Assets

Fixed Assets

Permanent Level

of Current Assets