ADIE Sdn Bhd runs a food processing business. Recently, the firm set up a new brancg at Bangsar, Kuala Lumpur.  The firm has invested RM700,000 in fixed assets. Besides that, the firm also have RM900,000 in current assets of which 60% are considered temporary assets. ADIE Sdn Bhd financed all permanent fixed assets and permanent current assets as well as half of its temporary current assets of new branch with long term financing from OUM Bank.

Required:

i) Identify the financing policy adopted by ADIE Sdn Bhd (your working to support your answer)

ii) Based on your answer discuss the risk-return trade off arising from the company's financing policy.

Answer rating: 100% (QA)

i ADIE Sdn Bhd has adopted a mix of financing policy that involves longterm financing for permanent ... View the full answer