You start a small business and you expect it to grow.
If your expectations are right and sales grow, you also have to experience asset growth.
For example, a company may issue a self-liquidating bond to pay for its inventory, which it intends to quickly sell.
Unless your assets grow and keep up with your sales growth, you will find that producing your product is a problem.The key to managing asset grown in small businesses is to forecast sales correctly. If your business sells a product, then your business will also have assets - both current and fixed assets.If your small business grows, then your firm will experience asset growth of both current and fixed assets.It is known that businesses fail because of unexpected growth as well as low sales so management has to be watchful at this point in the growth of their businesses.Assets like inventory and accounts receivable rise with firm growth and fall with firm contraction.
Business management has the task of keeping asset growth in line with sales growth as one of the causes of business failure is too much asset growth for firm sales.
Assets must grow in order to support your business and your sales. You will probably extend more credit to your customers and your accounts receivable will grow.
When a small business is first starting out and begins to grow, all of their current assets will be self-liquidating.
If actual sales differ greatly from forecasted sales, then some of your assets, such as inventory (the product you sell) will unexpectedly either build up or decline. Current assets are those that you expect to liquidate within one year.
Current assets include inventory or the products you have for sale, accounts receivable or your credit accounts, and your cash account. They are usually plant and equipment - buildings, machinery, office furniture, electronics, vehicles and other large, expensive assets.
At this stage of business, you will have a certain level of your books that are permanent current assets, along with your self-liquidating inventory.