Week 4 Disc
WEEK 4 DISC 3
Workingcapital management strategy describes a strategy that balancescurrent liabilities and current assets of an organization in order toaid the organization meet the short term obligations and balance theoperating expenses (Bhattacharya,2009). The two chief components of a working capital managementstrategy entail the current liabilities and current assets. Currentliabilities are obligations that an organization may incur during itsoperating period these obligations are expected to be paid within aperiod of one year. Examples of liabilities in this group includeunearned revenue, employee wages, accounts payable, taxes, andinventory purchases. On the other hand, current assets are thoseitems in an organization, which can be quickly turned into cash.Examples in this category include accounts receivables, inventory,and short term inventories (Bhattacharya,2009).
Aggressiveand conservative asset mix strategies have some similarities anddifferences. Aggressive and conservative asset mix strategies can usethe same vehicles of investment and may use the same mix of assetsthat has different proportions to one another. When it comes to risk,the two strategies have varied risk tolerances. Conservative assetmix strategy tends to work in favor of lower risk takers, whereasaggressive asset mix is more than willing to accommodate high risks,which make aggressive asset mix, become well suited for high risktakers. When it comes to the issue of liquidity, aggressive asset mixand conservative asset mix may have a difference depending on thevolatility (Iverson,2013). Aggressive asset mix strategies are usually geared towardsaggressively-oriented investors this make the mix more liquidcompared to that of the conservative mix strategy since thevolatility is more in the aggressive investors. However, the goals ofthe two strategies do not differ.
Bhattacharya,H. (2009). Workingcapital management: Strategies and techniques.New Delhi: Prentice-Hall of India.
Iverson,D. (2013). Strategicrisk management: A practical guide to portfolio risk management.Singapore: Wiley.