According to Afzar and Nair in 2007, current asset is one of key factor of Working

capital management because working capital policy is the method to reduce risk
from control curret assets and curret liabilites. So the important point of Working
capital policy is focus on the liquidity. If the firm has too much cash to reduce risk
to bankruptcy, the cash management is not effectively because cash and cash
equivalent is used to make the business run smoothy by paid for current
liabilities. Hence, the firm should have a good strategy for working capital. Base
on the literature of finace, there are three kinds of strategy to classify the worling
capital: Deffensive, Argressive and Conservative (Arnold, 2008).
Defensive:
Defensive policy converts long-term debt into short-term assets. When a firm
manages its assets and liabilites by follow this strategy, the interest rate will be
high, but they will have more opportunities to reinvest in other short-term goals.
Paramasivan and Subramanian in 2009 said that if the firm applied this strategy,
the can expectived the life of assets and life of resource of funds, so the financial
plan can be adopted. Besisde that, Danuletiu, A.E in 2010 appoved that the policy
is more conservative, costly and less profitable. It is a negative relationship
between profitability and working capital when they analyzed that relationship of
companies from Alba Country. However, according to Arnold in 2008, when follow
this strategy, the risk may decrease because the current debt is low, but when
firm focus on reinvestment, they will has risk of high interest rate, and it leads to
the companies will faced bankruptcy.
Aggressive:
An aggressive working capital policy is one in which the firm tries to squeeze by
with a minimal investment in current assets coupled with an extensive use of
short-term credit. It is a risky policy that requires maximum amount of investment in current assets. The goal is to put as much cash to work as possible to
decrease the time needed to produce products, turn over inventory or deliver
services, speeding up the business cycle grows sales and revenues. The
companies keep little cash, cut slow-moving inventory and unnecessary supplies
to the bone and stretch out your bill payments for as long as possible. Hence, this
kind of strategy should be used in stable economy and the company use it to
require the quite certain future cash flow.
Conservative:

This strategy is mix of two policies: aggressive and defensive. This policy tries to avoid the
risk involved in financing of current assets. Here, relatively high proportions of long-term
sources are to be used for financing current assets. The firm not only matches the current
assets with current liabilities but also keeps some excess amount to meet any uncertainty.
This is the lowest risk working capital policy and fails to ensure optimum utilization of funds.
Hence it cuts down the expected returns of the shareholders. Paramasivan said that this is the
low risk and low return solution.

Trade-off theory :