Planning of Funds through Management of Assets – Fixed and Current
FIXED ASSETS MANAGEMENT
A fixed asset is a long-term tangible piece of property that a firm owns and uses in its operations to generate income. Fixed assets are not expected to be consumed or converted into cash within a year.
A fixed asset is bought for production or supply of goods or services, for rental to third parties, or for use in the organization. The term ‘fixed’ translates to the fact that these assets will not be used up or sold within the accounting year. A fixed asset typically has a physical form and is reported on the balance sheet as property, plant, and equipment (PP&E).
When a fixed asset has reached the end of its useful life, it is usually disposed of by selling it for a salvage value, which is the estimated value of the asset if it was broken down and sold in parts. In some cases, the asset may become obsolete and may no longer have a market for it, and will, therefore, be disposed of without receiving any payment in return. Either way, the fixed asset is written off the balance sheet as it is no longer in use by the company.
Some accountants categorize intangible long-term assets, such as trademarks and patents, as fixed assets, and more specifically refer to them as fixed intangible assets.
Importance of Fixed Assets
Information about a corporation’s assets helps create accurate financial reporting, business valuation, and thorough financial analysis. Investors and creditors use these reports to determine a company’s financial health and to decide whether to buy shares in or lend money to the business. Because a company may use a range of accepted methods for recording, depreciating, and disposing of its assets, analysts need to study the notes on the corporation’s financial statements to find out how the numbers were determined.
Fixed assets are particularly important to capital intensive industries, such as manufacturing, that require large investments in PP&E. When a business is reporting persistently negative net cash flows for the purchase of fixed assets, this could be a strong indicator that the firm is in growth mode.
CURRENT ASSET MANAGEMENT
The ageing analysis of your current assets including stock, debtors etc is of large importance, since it is directly linked to the liquidity position of the company. You have more space to business and more chances of profitability, when you are successful in reducing your money in hands of your associates.
We have a strong analytical team which is trained in credit management. The debtor- creditor position will be analyzed periodically and insights on the ideal Current ratio position will be given to the management. We will intimate your team, when the optimum credit ratio is crossed or when the stock in hand position goes below the margin.
Current asset management includes management of cash, cash equivalents, accounts receivable and prepaid expenses. Directus can help you to maintain a good current asset position by effective debtors and creditors’ management. Directus current assets management program focuses mainly on accelerating of the payments due to the company through continuous follow ups and thereby reduces the time of debt realization considerably.
In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle (whichever period is longer). Typical current assets include cash, cash equivalents, short-term investments (marketable securities), accounts receivable, stock inventory, supplies, and the portion of prepaid liabilities, sometimes referred to as prepaid expenses, which will be paid within a year.In simple words Assets which are held for a short period are known as current assets. Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business.