Financing is a critical part of the success of every business. Firms often require funding involving both long and short term objectives  to cater to their long-term assets and current assets. Long-term assets grow slowly with Increase in productive capacity and may require replacement in the long run. Consequently, matching long-term financing with long term assets enables the company to acquire capital goods which include both tangible and intangible assets for optimal long-term operations (Fosberg, 2012). Often, a company own capital, long term debt, and equity are the major sources of long term financing. Therefore, by accumulating retained earnings and current profits, an entity is capable of balancing between long-term assets and long-term financing to work out net income and maintain competitive power.

On the other hand, short-term financing involves allocating funds for current assets used in company daily operations. Since small businesses entities cannot access long-term financing, they rely on short-term financing for their day-to-day activities (Block, Hirt and Danielsen, 2014). The main sources of such fundings are bills and loans. Compared to long-term financing, short-term financing of current assets is relatively easy to qualify if the business has a positive cash flow. However, the financing option is more expensive in terms of interest rates required.  Therefore, this kind of financing is not a recommended option for major investments in a company.

In general, failure to match current assets with current financing and long term assets with long term financing result in several disadvantages.  Firstly, financing decisions are important in proper asset management (Kono and Barnes,2010). Accordingly, failing to match appropriately can lead to poor evaluation of growth indices in a business. Moreover, financing-asset balancing is critical in achieving both short-term and long term goals of a business. Therefore, without the right matching of asset and financing, an organization may not achieve its goals.