Answer to Question #6983 in Economics of Enterprise for LaMarcus Streeter
Because with a moderate working capital financing policy, non-current assets and permanent current assets are financed with permanent finance and only the fluctuating current assets are financed with short term debt.
Fluctuating current assets are $410,000-$320,000 = $90,000. These assets are financed with short term debt. Other $320,000 is financed with permanent finance. And permanent finance is long-term debt plus equity capital.
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