Tabulated below for easy reference are the classification of assets and the sources of finance
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Classification Of Assets
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Classification of Sources of Financing
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Divided into 2 types:
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Divided into 3 types
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Permanent Assets
Expected to be held for more than a year
Two types viz:-
· Fixed asset
- Permanent current assets which includes current assets like cash / stocks / receivables re: minimum cash or bank balance or minimum level of stocks (safety or buffer stocks) maintained by the firm over the year
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Permanent Sources
Financing with maturing period more than one year which includes medium term loans, common stock and long term debts
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Temporary Assets
Current asset that will be liquidated and replaced within the current year.
Therefore:
Current assets = Temporary + Permanent
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Temporary Sources
Short term financing like short term notes payable, commercial paper and loans secured by accounts receivable and inventories. Natural sources is the accounts payable/creditors of the firm.
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Spontaneous Sources
Comprises trade credit and other accounts payable that arise spontaneously in the firm’s daily operations. Other sources like accrued taxes, accrued expenses still not paid
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