What is meant by the term “matching approach” in financing fixed and current assets?

CPA-Financial-Management-Section-3 Revision kit

Matching approach
The matching approach to funding is where the maturity structure of the company‟s
financing matches the cash-flows generated by the assets employed. In simple terms, this means that long-term finance is used to fund fixed assets and permanent current assets, while fluctuating current assets are funded by short-term borrowings.

Leave a Reply

Your email address will not be published. Required fields are marked *