Q. Show example on aggressive working capital policy?
With an aggressive working capital policy, a company would hold minimal levels of inventories in order to minimise costs. With a conservative working capital policy company will hold large levels of inventories. Moderate policy is somewhere in between the conservative and aggressive.
Short-term debt can be cheap though it is also riskier than long-term finance as it should be continually renewed. Hence with an aggressive policy, the company can report higher profits because of lower level of inventories, trade receivables and cheaper finance however there is greater risk.