- June 2, 2021 at 6:57 pm #622829Syed Ahsan AliParticipant
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Sir, Is it true that Working Capital Financing Policy & Working Capital Investment are two different things!
1) WC Financing can be Conservative Policy where we have too much Current Assets which is favourable to liquidity issues rather than profitability aspect. We have to see whether the company is using Long-term Finance to fund its Current Assets.
However, Aggressive Financing Policy is where we have too low Current Assets which is favourable to Profitability rather than liquidity issues. We have to see whether the company is using Short-term Finance to fund its Current Assets.
2) WC Investment Policy can be Conservative where the company is investing too much funds in Current Assets which is good for long-term liquidity rather than earning profit seemingly. If company has invested Long-term Finance in its Current Assets then it is Conservative Policy.
However, Aggressive Investment Policy is where the company is investing too low funds in Current Assets which is goods for short-term Profitability but not good for Long-term Liquidity issue which can arise. If company has invested Short-term Finance in its Current Assets then it is Aggressive Policy.
Please make me right if I am wrong anywhere!June 3, 2021 at 6:57 am #622874John MoffatKeymaster
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Yes they are two different things and what you have written is fine 🙂
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