What is the difference between aggressive and conservative approach?

What is the difference between aggressive and conservative approach?

The Conservative approach is highly conservative with very low risk and, therefore, low profitability. An aggressive approach is highly aggressive, having high risk and high profitability.

How the conservative approach of working capital policy differ from hedging approach?

The hedging approach implies low cost, high profit and high risk while the conservative approach leads to high cost, low profits and low risk. Both the approaches are the two extremes and neither of them serves the purpose of efficient working capital management.

Is it better to be aggressive or conservative in managing working capital?

If you’re too aggressive, you could face going into default or even bankruptcy if you can’t meet your financial obligations. But if you’re too conservative in your cash management, you could miss opportunities and stagnate your growth altogether.

What is the difference between a conservative current assets policy and an aggressive current assets policy?

An aggressive policy means spending as much as possible to churn out products, move inventory and deliver services. With a conservative approach, money is being saved, and your business is buffered, somewhat, against risk.

What is a conservative working capital policy?

The working capital policy of a firm is called a conservative policy when all or most of the working capital needs are met by the long term sources and thus the firm avoids the risk of insolvency. So, under the conservative approach, the working capital is primarily financed by long term sources.

What are the three types of working capital financing policies?

Broadly, three strategies can help optimise working capital financing for a business, namely, hedging, aggressive, and conservative, as per the risk levels involved….What Are The Different Working Capital Financing Policies?

  • Conservative Policy.
  • Aggressive Policy.
  • Hedging Policy.

What is conservative working capital policy?

What is aggressive approach in working capital management?

The aggressive approach is a high-risk strategy of working capital financing wherein short-term finances are utilized to finance the temporary working capital and a reasonable part of the permanent working capital.

How does the aggressive and conservative working capital policy would effect on the company’s profitability and risk?

A conservative working capital policy has the potential to increase profits but face a high liquidity risk. Conversely, an aggressive working capital policy has the potential to reduce profitability but has a low liquidity risk.

What is aggressive financing policy?

Aggressive Financing Policy (AFP) In Aggressiveness of Financing Policy (AFP) companies engaged elevated levels of short term assets and liabilities. or current natured liabilities and puts low level of investment in long term liabilities in contrast, conservative. financing policy consider more long-term debt.

What is aggressive approach of financing working capital?

What are the three types of working capital policy?

The working capital policy of a company refers to the level of investment in current assets for attaining their targeted sales. It can be of three types: restricted, relaxed, and moderate.