Data:2009-12-12 2:34
Category: Money tips Release Date: 2007-02-16
Xiao Zhang Teacher:
Hello! Take this opportunity to ask your advice in an accounting issue. The book said: a short operating cycle, the flow rate is fairly low, the flow of business a long cycle higher rates. I do not understand, I think the business cycle, short-term, corporate benefits, if better, then income should be more liquid assets will be more liquidity ratio should be higher than the long life cycle Caidui. I understand fault lie?
Zou Yang
Zou Yang:
Hello!
The current ratio of accounts receivable and inventory turnover rate is affecting the level of current ratio an important factor. A short cycle of business enterprises, their capital turnover is quick, usually its accounts receivable and inventory turnover is faster, that is, the balance of its accounts receivable and inventory carrying inventory should in general be lower; while operating and long-term enterprise, its capital turnover slow pace of the recovery of accounts receivable may also be shorter than the business cycle, the slow, inventory will be relatively more common.
Therefore, a short business cycle, liquidity may be longer than the business cycle, less liquid assets. For the book above, that is what I understand, I do not know whether it is correct, for reference. Of course, the level of the main current ratio should also be to the same industry and enterprises to compare their own historical data in order to explain the ratio is high or low.
Hu
