1. Financing current assets Aa Aa E What are the current asset financing strategies that firms adopt? Firms manage a variety of current assets. Permanent current assets are needed for the firm to maintain its business, and they will be carried even through downturns in business cycles. Temporary current assets fluctuate seasonally or with business cycles. Each firm must devise a financing strategy that best fits its business situation and best manages its risk. Use the following table to identify the different current asset financing policies. Financing Policy Conservative approach Aggressive approach Maturity matching approach Description All fixed assets, the permanent portion of current assets, and a portion of the temporary component of current assets are covered by long-term debt. The remaining portion of temporary current assets is covered by short-term financing. All fixed assets and a portion of permanent current assets are covered by long-term debt, and all temporary and the remaining portion of permanent current assets are covered by short-term debt. All fixed assets and the permanent portion of current assets are financed with long-term capital, and temporary current assets are financed with short-term loans