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      Question

      Which financing strategy balances liquidity risk and

      cost by matching short-term needs with short-term funds and permanent working capital with long-term funds?
      A Conservative approach Correct Answer Incorrect Answer
      B Aggressive approach Correct Answer Incorrect Answer
      C Matching or hedging approach Correct Answer Incorrect Answer
      D Highly leveraged approach Correct Answer Incorrect Answer
      E Hybrid approach Correct Answer Incorrect Answer

      Solution

      The matching/hedging approach finances temporary current assets with short-term funds and permanent current assets with long-term sources, balancing risk and return.

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