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

Abc analysis-pareto analysis, ABC Analysis (Pareto Analysis) In ordinar...

ABC Analysis (Pareto Analysis) In ordinary parlance, ABC analysis can be best compared with our class society where the population is categorized into Top, Middle and Lower cla

Steps of developing a cost estimating relationship , STEPS OF DEVELOPING A ...

STEPS OF DEVELOPING A COST ESTIMATING RELATIONSHIP Firmly speaking, a CER is not a quantitative method. It is a framework for using suitable quantitative methods to quantify a

Internal Controls, What is the definition of internal controls

What is the definition of internal controls

Identify which of the entities listed should record, Frontier Sports sells ...

Frontier Sports sells hunting and fishing equipment and provides guided hunting and fishing trips. Frontier Sports is owned and operated by Wally Schnee, a well-known sports enthus

Incremental analysis, What nonfinancial factors should management consider ...

What nonfinancial factors should management consider in making its decision on whether to accept or reject a special order?

Accounting , I have two problems due in two hours can you do this for me?

I have two problems due in two hours can you do this for me?

Calculate earnings per share, EMERALD LTD is planning an expansion programm...

EMERALD LTD is planning an expansion programme,which will require Rs 30 crores & can be funded through one of the following 1.issue further equity share of Rs 100 each at par.

Steps making decisiontree, Steps making DecisionTree A decision tree is...

Steps making DecisionTree A decision tree is a graphical representation of decision process indicating decision alternatives, states of nature, related probabilities and condit

Treasury management, Treasury management is explained as "the corporate han...

Treasury management is explained as "the corporate handling of all financial matters, the production of external and internal funds for business, the management of cash flows and c

Multiple regression, MULTIPLE REGRESSION The least square regression eq...

MULTIPLE REGRESSION The least square regression equation discussed above was based on the assumption that total cost was determined by only one activity based variable. However

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