Working capital is the amount of money used to facilitate the operations of the business.
Dividing current assets by current liabilities provides a ratio indicating the amount of cash available per dollar of current liabilities.
Seasonal assets (seasonal inventory, for example) and accounts receivable represent short-term investments; thus, they are financed with short-term debt and are repaid out of the cash flow generated from liquidating the assets without the need to replace them at the end of the season, as illustrated by our working capital cycle.
So, if you need to beef up your inventory for a seasonal sales increase, such as Christmas, using a credit line is perfectly acceptable.
The enterprises may consolidate secondary, separate parts, such as molds, tools, swages, and apply the criteria of tangible fixed asset to such aggregate value.
Any related installed accompanying fixed assets shall only be accounted as tangible fixed assets if without them the enterprises would not be able to operate and sell their chemical products. The second criterion (prescribed in Section b, paragraph 06) for recognizing tangible fixed assets is often satisfied since the historical cost of the fixed assets has been already determined through procurement, exchange, or self-construction. When determining components of tangible fixed assets, the enterprises must apply the criteria of tangible fixed asset on a case-by-case basis.When the source is borrowed funds, it is absolutely critical that you match the length of the debt with the asset's ability to generate cash flow or net profits and thus repay the debt.A short-term loan such as a credit line should be used for short-term assets (also known as current assets) with the logic being that you'll get the cash from the sale of your inventory to pay off the loan within the year.The "bottom line" of a balance sheet must always balance (i.e. The individual elements of a balance sheet change from day to day and reflect the activities of the company.Analyzing how the balance sheet changes over time will reveal important information about the company's business trends.