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Most important to be managed: cash, receivables, inventory

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Which of the following is the most important for an organization to manage: cash, receivables, or inventory? Defend you answer.

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Solution Summary

In a 359 word solution, the response defines liquidity and then carefully explains how liquid assets are managed including which are most important, and what the procedures are for effective management.

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I think that assets must be managed in their order of liquidity for two reasons, but first let me define order of liquidity. That means that assets are arranged on a balance sheet in the order in which they will convert to cash. Cash is first because it is already cash. Normally accounts receivable will convert to cash quickly, maybe within 30 to 90 days. Inventory is often next in liquidity in that it takes time to sell it and then collect the accounts receivable.

Back to my two reasons to manage the most liquid ...

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