Essay: Selecting a Financing Strategy

Essay: Selecting a Financing Strategy
June 8, 2011 Comments Off on Essay: Selecting a Financing Strategy Academic Papers on Business Studies,Sample Academic Papers admin

Sample Essay

Selecting a financing strategy is one of the main functions of a financial manager in a company. The brief comparison of aggressive and conservative strategies with their respective advantages and risks were explained in the previous section of this paper. The use of aggressive strategy as identified for Wave Satellite was far more advantageous than conservative strategy as the cost for aggressive strategy was quite lower than the cost of conservative strategy. The choice of strategies is highly dependent on the specific financial position, situation and requirement in a company. Albeit the choice of financing strategy is dependent on various factors, in normal circumstances the aggressive financing policy is recommended as it mostly has lower cost and lower risks.

The aggressive financing strategy entails that temporary requirements are funded by short term financing while permanent requirements are funded by long term financing. This strategy provides a more logical approach to financing and utilizing short term and long term funds. The conservative strategy is usually applied when the company forecasts that requirement of funds will remain uniform almost throughout the year and short term funds may be utilized for other purposes. In this scenario the company may incur a higher cost but short term financing may be used in taking advantage of any seasonal investment options that become available.

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