FIN 419 Week 3 DQs

FIN 419 Week 3 DQs - Week 3 DQ 1 What is an aggressive...

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Week 3 DQ 1 What is an aggressive financing strategy? The term aggressive financing strategy can be defined as a strategy that uses the short-term funds for funding all the temporary needs of a company and sometimes a portion of its stable needs. With the help of long term funds it finances only a few of its fixed assets whereas the existing needs and necessities are not financed by long term funds. Gitman in 2006 has defined financing strategy as an investment strategy in which the firm finances its temporary necessities by using short-term debt and uses long term debts to finance its permanent requirements with long-term debt. What are the components of aggressive finance strategies? In an aggressive finance strategy, the firm funds a portion of its long lasting current assets and yet its fixed assets by using short term basis of finances. The short term sources of finances comprise of the marketable securities, short term loans, bank overdraft, and accounts payable. What is difference between the aggressive and conservative financing model? A conservative financing strategy is defined as a strategy that utilizes long-term finances for funding all the projected requirements and utilizes short-term funds when there are crisis. To execute the strategy is very difficult as it is not possible to avoid the use of impulsive short-term funding sources like accounts payable and accruals (mentioned in Conservative Financing Strategy, 2008). But when we look at the aggressive financing strategy it is one under which the company uses short-term sources of finances for investing its current assets of a firm and a small portion of its permanent needs. The main difference between the aggressive and conservative strategy is that conservative utilizes long term finances where as aggressive uses its short term ways of financing not only for financing its current assets but also noncurrent assets. Under what circumstances would you use either one?
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FIN 419 Week 3 DQs - Week 3 DQ 1 What is an aggressive...

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