Question

discuss the salient working capital management strategies in an organisation of your choice,

Answer 1

Ans: There are three types of working capital strategies for the purpose of financing the net working capital of the firm which are as follows:

1 Conservative Strategy: In this working capital is financed with low risk and low profit. Apart from fixed assets and permanent current assets temporary working capital is also financed by long term financing sources.

2 Aggressive Strategy : This policy is focused towards high profitability .It is a high risk high profitability strategy .In this strategy long term funds are utilized to finance the only fixed assets and a part of permanent working capital. Complete temporary working capital and a part of permanent working capital are also finances by short term funds.

3 Hedging Strategy : In this strategy working capital is financed with moderate risk and profitability. In this kind of strategy each of the asset financed by the debt instrument having the same maturity.