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If a company purchases inventory, makes a sale, issues an accounts receivable, and collects it within the accounting period, it is called?

(a).Working capital management
(b).Self-liquidating asset
(c).Sales generation cycle
(d).Permanent current Asset

User BRogers
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Final answer:

The process where a company acquires inventory, sells goods, issues, and then collects accounts receivable within one accounting period is known as a self-liquidating asset.

Step-by-step explanation:

When a company purchases inventory, makes a sale, issues an accounts receivable, and collects it all within the accounting period, it is engaged in a sales generation cycle. This entire process illustrates the company's ability to transform its inventory into cash flow through sales. It is part of the wider working capital management, which is a crucial aspect to ensure the business can meet its short-term liabilities and effectively utilize its assets for growth. However, among the options provided, (b) Self-liquidating asset is the most appropriate term for assets that are converted into cash within a short period, typically within the business cycle. Reinvesting profits into the business through improving infrastructure, increasing labor, or advanced technology ensures growth and a higher cash flow for subsequent sales periods, which leverages the self-liquidating nature of assets to facilitate expansion.

User John Verber
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