Continued... .Appropriate Level of Working Capital Conservative Aggressive CIA More Less Profitability Lower Higher Risk Lower Higher More conservative policies often result in lost sales due to restrictive credit policies Optimal level of working capital investment is the level which is expected to maximize shareholder wealth 剥外经价贫多方居 YO年NEB证事0000
• Appropriate Level of Working Capital Conservative Aggressive C/A More Less Profitability Lower Higher Risk Lower Higher More conservative policies often result in lost sales due to restrictive credit policies Optimal level of working capital investment is the level which is expected to maximize shareholder wealth Continued Continued…
Continued... Optimal Level of S-T and L-T Debt Term structure of interest rates Higher risk with S-T debt o Refund o Fluctuating S-T interest rates Permanent C/A o Are not affected by seasonal or cyclical demand Fluctuating C/A Are affected by seasonal or cyclical demand Matching maturity of debt and assets o Conservative Vs Aggressive 剥外校价贫多方号 YO年NEB证事00003
Continued Continued… zOptimal Level of S-T and L-T Debt – Term structure of interest rates – Higher risk with S-T debt o Refund o Fluctuating S-T interest rates – Permanent C/A o Are not affected by seasonal or cyclical demand – Fluctuating C/A – Are affected by seasonal or cyclical demand – Matching maturity of debt and assets o Conservative Vs Aggressive