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Unformatted text preview: ributes positively to the firm’s
value. This chapter does not discuss the optimal level of current assets and current liabilities that a firm should have. That issue is unresolved in the financial literature. Here we first use net working capital to consider the basic relationship
between current assets and current liabilities and then use the cash conversion
cycle to consider the key aspects of current asset management. In the following
chapter, we consider current liability management. Net Working Capital
Current assets, which represent
the portion of investment that
circulates from one form to
another in the ordinary conduct
of business. net working capital
The difference between the
firm’s current assets and its
current liabilities; can be
positive or negative. Current assets, commonly called working capital, represent the portion of investment that circulates from one form to another in the ordinary conduct of business. This idea embraces the recurring transition from cash to inv...
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