The Financing Of Current Assets By U.S. Corporations: Some New Evidence

Abstract

This paper examines the working capital policies of U.S. corporations by analyzing the responses of 113 Chief Financial Officers to a 20 item questionnaire.  The results of this survey indicate that most companies do not employ the matching principle in financing their current assets requirements.  Instead, the majority of respondents indicated that their firms followed an aggressive approach, which may increase the financial risk of the firm.  Cross-tabulations suggested a number of explanations for this practice, including the lower cost of short-term debt and the ease of negotiating/renegotiating short-term debt.