put a comment in this two post ?

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Long-term investments, or permanent fixed assets, refers to an account that the company plans to keep for at least a year. Things such as stocks, bonds, and real estate are examples of permanent fixed assets. Investors who are long-term are usually more willing to take on higher risk to gain higher rewards. These long-term investments differ from short-term investments because they are not meant to be sold within a year like the short-term investments are. An article from Investopedia defines a permanent current asset as the minimum amount of current assets a company needs to continue operations'' (Tuovila, 2021). This includes inventory, cash, and the accounts receivable as current assets and base amounts of these assets need to be sustained to carry on the business. Temporary current assets are the companys current assets that fluctuate over time, seasons, and they are expected to consume or sell within a year. If there is a decrease in temporary current assets, it will not impact business operations and they may change due to business activities.

Long-term financing is a mode of financing that is offered for more than one year. For permanent fixed assets and permanent current assets, I would favor using long-term funds. Since companies generally regard permanent current assets as more fixed, or long-term, long-term debt would be best to finance them with. Paying off short-term debt within one year could be disruptive to the maintenance of baseline current assets and long-term finance also offers protection from credit supply shocks and having to refinance in bad times. One key benefit to long-term finance debt is that it generally will have a fixed interest rate and therefore consistent monthly payments and high predictability. These characteristics make it much easier for the firm to budget their operational income that they will need to make the payments. Overall, long-term financing for the portion of permanent current assets and permanent fixed assets is the best option in my eyes because it allows for better budgeting and forecasting capability.

For temporary current assets, I would favor short-term financing sources. Short-term finance refers to any financing that a borrower pays off over a shorter repayment period. I would use short-term financing because they have a quick funding time and are considered less risky and they are easier to acquire. Also, there is a shorter time for incurring interest because these loans need to be paid off within the year so there are lower total interest payments. This is ideal for temporary current assets because they fluctuate over time and they are expected to be sold off within a year.

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Managing the firms net working capital (its liquidity) involves interrelated decisions regarding its investments in current assets and use of current liabilities. Fortunately, a guiding principle exists that can be used as a benchmark for the firms working-capital policies: the hedging principle, or principle of self-liquidating debt. This principle provides a guide to the maintenance of a level of liquidity sufficient for the firm to meet its maturing obligations on time. (Foundations of Finance p.483)

The hedging principle would therefore be the guiding principle in determining the appropriate financing source for: permanent fixed assets (long-term investments) in which case we would use long-term financing sources such as term loans, notes, and bonds as well as preferred and common equity; permanent current assets, in which we would also utilize long-term financing; and finally temporary current assets, in which we would utilize short-term financing sources such as notes payable and revolving credit agreements to be paid within one year.

The why part of this answer has to do with the Risk-Return Trade-Off and how this principle relates the liquidity of a firm as well as its return on investment. This trade off involves the risk of illiquidity verses increased profitability. Managing this trade-off is an important theme of working-capital management. (Foundations of Finance p.482)