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Aggressive versus conservative approach
A firm choosing to have a lower level of working capital (including cash) than
rivals is said to have an ‘aggressive’ approach, whereas a firm with a higher
level of working capital (including high cash balances) has a ‘conservative’
approach.sir this is a statement from the kaplan guide
i cannot really understand it ,
in simple terms what is a conservative approach and aggressive approach and which one should be prioratized ?If they have a low level of working capital then the costs of maintaining it will be low (for instance low stock holding costs), but there is a risk of having liquidity problems. This is an aggressive approach.
If they choose to have a high level of working capital there is less risk of having liquidity problems but it will be more expensive to hold high levels. This is a conservative approach.
Please do not expect me to explain statements in the Kaplan Study Text. My free lectures cover everything needed to be able to pass the exam well (you do not really need the Text is you are watching the lectures – the essential book is the Revision Kit because question practice once you have finished studying is vital for passing the exam).
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