8.3 FINANCING OF CURRENT ASSETS
Apart from the size of current assets, the other significant issue in the management of working capital is how these current assets should be financed. There is no problem in financing the fixed assets as they are financed through long-term funds. In case of the current assets, however, any such decision is not easy, because current assets are financed out of both short-term funds (current liabilities) and long-term funds. It is crucial as to what should be the mix of short-term funds and long-term funds for the purpose of financing the current assets. The use of short-term funds is advocated on the grounds that they are less costly than the long-term funds, and their use will have a favourable impact on profitability. ...
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