FIN 419 Week 3 DQs - 7634

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What is an aggressive financing strategy?

What are the components of aggressive finance strategies?

What is difference between the aggressive and conservative financing model?

Under what circumstances would you use either one?

What is an asset?

What is a liability?

What is the difference between assets and liabilities?

Can an organization operate without current liabilities? Explain.

Define factoring of accounts receivables.

How does factoring effect cash management?

Explain the difference between factoring and accounts receivable financing.

What is zero working capital? How would you define zero working capital?

When would this methodology be used?

Would this model be applicable to all organizations? Explain.

Solution Description

An aggressive financing strategy is one that uses the short-term funds for financing all the seasonal needs of a firm and a part of its permanent needs. It finances only some of its fixed assets (and not all the current needs and requirements) through long term funds.

“A funding strategy under which the firm funds its seasonal requirements with short-term debt and its permanent requirements with long-term debt” (Gitman, 2006, p. 634).

Under an aggressive finance strategy, the firm finances a part of its permanent current assets and even its fixed assets with the short term sources of funds. The short term sources of funds include the short term loans, bank overdraft, marketable securities, and accounts payable.  


A conservative financing strategy is one that employs long-term funds for financing all the anticipated needs and uses short-term funds only in emergencies. This strategy is difficult to implement because it is almost impossible to avoid the use of spontaneous short-term financing sources like accounts payable and accruals (Conservative Financing