Class Participation

Date: 14th March, 2023

Name: Sankalp Mishra (BD22092)
Section: C

1) Q. What are current assets?

My response: Assets that are less than 1 year in the company are called current assets.
Faculty response: Current assets are assets that are needed for the operating cycle. Eg.
Inventory that is stored for more than a year but the company realized that the inventory
cant be sold so it becomes a non-current asset.

Class Learnings:
 Working capital is basically the money needed to run the operating cycle. It is calculated as
Current Assets-Current Liabilities.
 Funds received through finance (i.e having finance cost) cant be called operating current
liability.
 It is very easy to maintain a positive working capital however that is not desirable because
then you need funds from outside.
 A negative working capital is very effective as then the company becomes a fund-generating
machine. It is possible when a company takes supply (raw material) on credit from its vendor
and also takes advance payment from its clients. However, this is sustainable only for strong
businesses having a good reputation with clients and suppliers.
 It is always beneficial to take short term liabilities to fund long term assets because short
term loans come with lesser interest rates compared to long term loans.