Characteristics of current assets, Managerial Accounting

Assignment Help:

Working Capital management is affected through two characteristics of current assets that are as follows (i) short life span (ii) swift transformation in the other asset forms.

Current assets consist of a short life span, cash balances can stay idle for 7 to 14 days, whereas accounts receivable generally have a life span ranging from 30-90 days and inventories may be conducted for 30 to 100 days.

All current assets are transformed in another current asset. This transformation will base upon the time and degree of synchronization of sales, production, procurement and also collection of receivables.

The production method begins with the purchase of raw material resulting in either reduce in cash or creation of accounts payable. The raw material purchased by the inventory that is further processed to generate finished goods. Finished goods are sold resulting in either raise in cash or creation of accounts receivable whereas the discharge of accounts payable outcomes in cash outflow. The operating cycle and the current asset cycle are demonstrated in figures 1 and 2 correspondingly.

1718_CHARACTERISTICS OF CURRENT ASSETS.png

Figure: Current asset cycle

730_CHARACTERISTICS OF CURRENT ASSETS1.png

Figure: Operating Cycle


Related Discussions:- Characteristics of current assets

Rules of game theory, RULES OF GAME THEORY 1) The number of competitors...

RULES OF GAME THEORY 1) The number of competitors is finite. 2) There is a conflict of interests between the participants. 3) Each of these participants has available to

Managerial accounting, Gafat Engineering Ethio plc manufactures two types o...

Gafat Engineering Ethio plc manufactures two types of TV sets LCD and CRT both having only one model. The LCD and CRT television sets sell for $9000 and $5000, respectively. the co

Factors influencing working capital requirements, The working capital needs...

The working capital needs of a firm are influenced by many factors. The important ones are as follows: Nature of business: The working capital necessity of a firm is closely l

Classification of costs, discuss which of the cost classification is suitab...

discuss which of the cost classification is suitable for LunchBreak LTD and why?

Medical office accounting final project, John Doe, MD A Business Simulation...

John Doe, MD A Business Simulation This simulation covers the transactions completed by John Doe, MD, a medical service business, which began on July 1 of the current year. Dr. D

Determine how the airline company has grown, From the subsequent financial ...

From the subsequent financial data describe: a) How the airline company has grown-up b) How the company has been capable to earn grater margins at higher levels of sales

Positioning, Positioning An essential part of the planning process is p...

Positioning An essential part of the planning process is positioning the organization to attain its goals. Positioning is a wide concept and depends on gathering and evaluating

Budget and Budgetary Control, I am to write thesis on Budget and Budgetary ...

I am to write thesis on Budget and Budgetary Contro. Can you please help me with contents and notes?

Dominance, DOMINANCE Dominance strategy is useful for reducing the size...

DOMINANCE Dominance strategy is useful for reducing the size of the payoff table. Rules of Dominance: 1) If all the elements in a column are greater than or equal to the

Gathering data-plotting graph-cost estimating relationship, Gather data con...

Gather data concerning the relationship among the dependent and independent variables Collecting data is generally the most hard and time-consuming element of CER development.

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd