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Working Capital Policy- Conservative vs Aggressive

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What are the relative advantages and disadvantages of a conservative working capital policy and an aggressive working capital policy?

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This posting compares the relative advantages and disadvantages of a conservative working capital policy and an aggressive working capital policy.

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Working Capital Policy- Conservative vs Aggressive

Conservative working capital policy refers to a situation where the firm allows its current assets to be a little larger and does less short-term borrowing. Example, a firm may hold a little extra cash to ensure that it doesn't run short in periods of higher than expected cash outflows. Also, it may allow for higher levels of accounts receivable. Selling goods on credit may help increase sales. However, the looser our credit terms, the more likely some of our receivables will never be collected. Higher ...

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