managing current assets and liabilities

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All businesses need cash to survive
• Cash is needed to:
– Invest in fixed assets
– Pay suppliers and employees
– Fund overheads and other fixed costs
– Pay tax due to the Government

Managing working capital effectively is, therefore, a vital part of making sure the business has enough cash to continue

INTRODUCTION
Managing Current Assets and Liabilities is nothing new to us. We practice it everyday without us notice it. Let us assume you want to reward your self by buying a new car. What are the things you consider? Shall I buy it paying by cash or installment basis? If I pay it by cash, a large amount of my savings will go to that car sacrificing other things I want to buy also. But if I pay it by installment, I have to consider the end of the payment total amount against cash price. I also have to consider whether I have enough salary to pay it by monthly for a period of time. I also have to consider whether I can continue receiving that particular amount until the duration of my monthly payment.
This paper will try to present a good picture of how to manage our current assets and liabilities.

FINDINGS
To begin with, Current assets is defined as company owned resources with a considerable value that is expected to be converted into cash in a period of less than one year in the normal course of business. These includes cash, inventory, accounts receivable, prepaid expenses, and short-term marketable securities and other assets that can readily be converted into cash within one year. On the other hand, current liabilities are company’s debts and loans or obligations that must be paid back to the lender within one year or less. This includes accounts payable , accrued expenses, and current portion of long term debts or loans. And if you compare the totals of these two groups of items, the difference is called the company’s working capital. What has working capital management has to do with these two groups of items?
Working capital is the



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