CAF-7 · Chapter 12 · Question 15 of 15
In working capital management, the 'Matching Principle' (or Hedging Principle) suggests that a firm should finance:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Short-term fluctuating assets with short-term finance, and permanent current assets and non-current assets with long-term finance
Explanation
The matching principle is a moderate approach to working capital financing. It states that the maturity of the funding should match the life of the asset being funded. Short-term needs get short-term debt; long-term and permanent assets get long-term debt/equity.
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