Abstract
Invested capital includes fixed and current assets. It is the latter less suppliers’ and other short‐term credit, which is referred to as net current assets or working capital. The terms fixed and current assets are used to differentiate between those resources that will not completely revert to cash within a year and those that will, respectively. The planning and control of current assets warrant the same skill and care as is lavished on fixed assets, the twin objectives of current asset management being: to minimise the time between the initial input of materials and other resources into the operating process, and the eventual payment by customers for goods or services supplied; this is known as the cash operating cycle, and success in this aim will reduce investment in stocks, debtors and liquid assets to a minimum; to finance those assets as efficiently as possible; with the overall objective of optimising the return on total capital employed.
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© 1998 Geoffrey Knott
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Knott, G. (1998). Financing Working Capital. In: Financial Management. Macmillan Business Masters. Palgrave, London. https://doi.org/10.1007/978-1-349-14766-3_17
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DOI: https://doi.org/10.1007/978-1-349-14766-3_17
Publisher Name: Palgrave, London
Print ISBN: 978-0-333-72822-2
Online ISBN: 978-1-349-14766-3
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