Question

From a finance perspective, do you think there exists a market in which investment in short-term assets is more important than investment in fixed assets?

Answer 1

From a finance perspective certainly investment in short term assets is important. If the entire investment is made in fixed assets the the funds are blocked for a long period of time. This is because fixed asset such as building plant and machinery are not liquid and the business cannot convert these assets into cash easily.

An organisation needs to have liquid funds so as to meet its working capital obligations and current liabilities. Hence it needs to invest a substantial portion of its funds into short term assets. These are assets such as cash and cash equivalents, marketable securities, accounts receivable and inventory. So the organisation will have to invest in short term assets so as to avoid default due to liquidity.

Hence the market exists in which investment in short term assets is more important than investment in fixed assets.