Explain how the concepts of liquidity, depreciability, marketability, and controllability apply to the following collateral:
- A dentist's accounts receivable
- A candy manufacturer's inventory
- A publisher's printing press
This represents how quickly an asset can be converted to cash - current assets are the most liquid, consisting of cash, accounts receivable, inventory, short term investments, pre pairs, and supplies. Of these, inventory would take the longest to convert to cash.
This generally applies to long term assets, such as buildings, equipment, plant, and the like.
For this purpose, marketability will be defined as the ability to market these assets in the event that they need to be changed.
This should represent the ability of the firm to control the type, amount, and quality of the assets which they own.
They are items which are owned (or in the process of being owned) by the company), and are obtained or held for one of two reasons:
#1 - they contribute to the ability to make sales'
#2 - they are used to control (manage) expenditures.
If assets do not perform one or both of the above conditions, then they should not be a part of the business structure.
Having said this, the ...
This is a financial analysis of finance concepts as they relate to a service provider, a manufacturer, and an provider of information. The concepts reviewed include liquidity, marketability, depreciation, and financial controls.