0
Why is it important to match the type of asset and the source of financing?
Wiki User
∙ 9y ago
Matching the type of asset and the source of financing is important because it helps to ensure that the financing used to acquire an asset is appropriate and sustainable over the long term.
Different types of assets require different types of financing. For example, short-term assets, such as inventory or accounts receivable, may be better financed with short-term sources of financing, such as a line of credit or trade credit. Long-term assets, such as buildings or equipment, may require long-term financing, such as a mortgage or a term loan.
If the type of asset and the source of financing are not appropriately matched, it can result in financial problems down the road. For example, if a long-term asset is financed with short-term debt, the debt may come due before the asset has generated enough cash flow to pay it off, potentially leading to default and financial distress. On the other hand, if short-term assets are financed with long-term debt, it may result in higher interest costs and a mismatch between the timing of cash inflows and outflows.
In addition, matching the type of asset and the source of financing is important for managing risk. For example, if an asset is financed with too much debt, it may become difficult to make payments if there is a downturn in the economy or the company's cash flows decline.
Overall, matching the type of asset and the source of financing is an important consideration for any business or individual looking to acquire assets and finance them in a sustainable and appropriate way
Kaleem Ulah
Wiki User
∙ 9y agoThe non current types of assets are the most important to match the source of financing. They can be used to secure huge loans.
Add your answer:
Earn +20 pts
The key to current asset planning is the ability of management to forecast sales accurately and then match production schedules with the sales forecast?
true
What is depreciation in terms of accounts?
Depreciation is an expense which is charged on fixed assets of a company. Over time, fixed assets of a company lose their value due to use, wear and tear, and natural causes. Since the exact value of fixed assets cannot be determined, depreciation is charged on them to get their estimated value. Depreciation is listed in the income statement of a company under the head "Expenses". It is also listed in the balance sheet as accumulated depreciation.
Why depreciation is considered as non-cash item and comes under the heading of operating expenses in Income Statement?
Depreciation is a way to match expenses for an assets that was purchased in a different accounting cycle. As the assets produces income, the expenses of the asset is then matched in following accounting cycles. It is considered an operating expense, since the matching assets is used for business operations.
In transaction management how do you match a transaction to a order?
Search a selected transaction, then search and select the order, then click the match to transaction button to match a transaction to an order.
How do you match a transaction to an order in transaction management?
Search a selected transaction, then search and select the order, then click the match to transaction button to match a transaction to an order.
Match each type of financing with the method used to obtain it. Debt financing equity financing public financing?
Debt financting-taking a loan from a bank Equity financting-selling owership in the company public offering-selling shares of stock on the open market
What is important ipl match or election?
ipl match
Is a match an artificial source?
Yes as it is made in industrys
The key to current asset planning is the ability of management to forecast sales accurately and then match production schedules with the sales forecast?
true
What load impedance Z will result in maximum power transfer from an electric source with an internal impedance of r?
For maximum power transfer, source resistance should match load resistance and source reactance should match load reactance with the opposite sign (so if the load is capacitive, the source should be inductive).
Capital budgeting decision making wiht unequal lives?
In capital budgeting with unequal lives first of all time lines are stretched to match exacly same number of years to find out the capital budgeting decision for example one asset with 3 years and another asset is for 4 years will equal to year 12 with asset one will be purchased 4 times while asset two will be purchased for 3 times and then all calculations related to cash inflows and outflows are done.
Why is latency important?
why is it important to match the latencies of the older modules to the newer modules
Do community colleges offer tuition financing?
You can check out scholarships and grants at scholarships.com or fast web.com. You will be allowed to complete a profile in which will match you with potential grants, schools and scholarships.
Match each type of financing with the method used to obtain i?
Venture capital: Group of investors; Angel investment: Wealthy individual; Business loan: Private bank.
Where did the Greeks hold an important sport match?
In an arena!
How important is a teamwork in a match?
Teamwork is important at a business because it helps a business be more professional.
How much stock do you put in "perfect match" quizzes?
The perfect match quiz is somewhat important because it includes many things you considered important for a match and compare that with a potential match individual. However, due to other factor, including honestly answering the questions, these match quiz may not completely reflect reality and therefore, one should always be cautious.
