Companies use this strategy to minimize risks, and the management regulates the credit limits to ensure low risks (Gambeta and Kwon, 2020). In a relaxed strategy, the current assets are always above the current liabilities to ensure sufficient availability of funds. Organizations hence often utilize long-term funds to finance the fixed and fluctuating current assets. Hence, the use of short-term assets is at a minimum to reduce risks and ensure the operation cycle’s smooth functioning.
