At the extreme, a firm that adheres to the conservative approach to finance current assets will finance all of its seasonal needs with long-term financing alternatives, thereby 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.
Answer the following statement true (T) or false (F)
True
The conservative approach to current asset financing is used to finance all permanent asset requirements (both fixed assets and permanent current assets) and also to meet some or all of the seasonal, temporary demands. 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. 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. See 14-3: Current Asset (Working Capital) Financing Policies
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Answer the following statement true (T) or false (F)
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