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    Question

    One of the approaches of Working Capital Management,

    where the company takes a strategy by which it finances all funds requirements with long-term funds for emergencies or unexpected outflows is known as:
    A Current Asset Investment Approach Correct Answer Incorrect Answer
    B Hedging Approach Correct Answer Incorrect Answer
    C Matching Approach Correct Answer Incorrect Answer
    D Conservative Approach Correct Answer Incorrect Answer

    Solution

    The conservative approach involves relying on long-term funds to finance both permanent and temporary working capital needs. This strategy aims to minimize short-term debt and reduce the risk of being unable to meet obligations in times of financial stress. It prioritizes stability and liquidity over maximizing returns, leading to a cautious and conservative management of working capital.

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