Aggressive working capital funding policy
An aggressive funding policy uses short-term finance for a larger share of working-capital investment, potentially including part of the permanent requirement. Short-term borrowing can be flexible or cheaper under some conditions, but it increases exposure to refinancing, rate changes and withdrawal of facilities. Compare it with a matching or conservative policy using the actual maturity profile, cost and liquidity buffers. Aggressive funding is distinct from an aggressive current-asset investment policy, which concerns the amount held.
Worked example
A business finances $600,000 of permanent working capital with a revolving facility repayable within a year. It must assess whether it can renew or replace the facility if bank conditions tighten.
Common mistake
Confusing the maturity of financing with the amount of inventory held, or assuming short-term debt will always be available at the same rate.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Supporting | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |