Alternate Current Asset Financing Policies

1. Maturity Matching Approach
2. Aggressive Approach
3. Conservative Approach

Advantages and Disadvantages of ST-financing

1. Speed
2. Flexibility
3. Cost of Long-term vs Short-term Debt
4. Risk of LT vs ST debt - yield curve

Sources of ST-financing

1. Accruals
2. Cost of Trade Credit - Cost formula
3. Short-term Bank Loans
• Compensating Balance - Cost formula
4. Commercial Paper
5. Use of Security in ST-financing

Practice Problem Solutions - 21-2, 21-4, 21-6