APPROACHES OF THE WORKING CAPITAL - Accounts and Finance for Managers

Approaches of Working Capital Management

The approaches of the working capital are classified into two categories viz the hedging approach and conservative approach:

The hedging approach: Under this approach, the maturity of the financial resources are matched with the nature of assets to be financed.

Permanent working capital are financed by the long-term financial resources and the seasonal working capital requirements are met out through short term financial resources.

The conservative approach: Acc to this approach, all requirement of the funds should met out long-term sources. The short-term resources should be only for emergency requirements

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