Question

“The most appropriate financing pattern would be one in which asset build-up and length of financing terms are perfectly matched.” Discuss the difficulty involved in achieving this financing pattern.

Short answer

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

Meaning of financing pattern

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

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.