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Chapter 3: Q 3-6-5DQ (page 182)

鈥淭he most appropriate financing pattern would be one in which asset build-up and length of financing terms are perfectly matched.鈥� Discuss the difficulty involved in achieving this financing pattern.

Short Answer

Expert verified

Financing pattern is difficult to achieve as no financial planner can appropriately determine the timing of build-up and length of financing required.

Step by step solution

01

Meaning of financing pattern

Financing pattern refers to the manner of obtaining finance for meeting the company鈥檚 requirements. This pattern is useful for managing the operational and financial goals of the company.

02

The difficulty in the mentioned financial pattern

The financial planner cannot determine the mentioned financial pattern and for it, the planner should have appropriate information regarding the timing of the asset build-up and the length of financing available at a given time.

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鈥淭he most appropriate financing pattern would be one in which asset build-up and length of financing terms are perfectly matched.鈥� Discuss the difficulty involved in achieving this financing pattern.
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