List – I List – II (a) A moderate approach to current asset financing. (i) Continually recurring short-term liabilities. (b) Short-term credit. (ii) Some permanent current assets and even some fixed assets, are financed with short-term debt. (c) Accrued liabilities. (iii) Involves matching the maturities of assets and liabilities. (d) Aggressive approach to current assets financing. (iv) Any liability originally scheduled for payment within one year.
Codes :
Matching Financial Concepts: List I and List II
This question requires matching concepts related to current asset financing strategies and liabilities with their corresponding definitions.
Analysis of Matches
- (a) Moderate approach to current asset financing corresponds to (iii) Involves matching the maturities of assets and liabilities. This strategy balances risk by aligning the timing of financing with the expected life of the assets being financed.
- (b) Short-term credit corresponds to (iv) Any liability originally scheduled for payment within one year. This is the standard definition of short-term credit, which provides temporary financing.
- (c) Accrued liabilities corresponds to (i) Continually recurring short-term liabilities. Accrued expenses, such as wages or taxes, are typical examples of liabilities that arise regularly and are due within a short period.
- (d) Aggressive approach to current assets financing corresponds to (ii) Some permanent current assets and even some fixed assets, are financed with short-term debt. This high-risk strategy uses short-term funds to finance not only temporary but also permanent working capital needs, and sometimes even fixed assets.
Summary of Matches
Based on the analysis, the correct matching is:
- (a) - (iii)
- (b) - (iv)
- (c) - (i)
- (d) - (ii)
This corresponds to option 2.
Important Questions from Working Capital
Which of the following statements is related to the 'Human Capital Theory'?
Which of the following rules stands true while preparing a schedule of changes in working capital?
(A) An increase in current assets increases working capital
(B) An increase in current assets decreases working capital
(C) An increase in current liabilities decreases working capital
(D) An increase in current liabilities increases working capital
Choose the most appropriate answer from the options given below:
As per which one of the following approaches, a firm finances a part of its permanent working capital with short term financing?
Negative Net Working Capital implies that :
Which one of the following will have a net change in the amount of working capital of a company?
