Question

How can you tell if a company has a good proportion of short term assets to long terms assets - and then should a company have higher value of long term assets versus short term? I'd like to know so I know what to look for and evaluate in any situation thanks

Answer 1

For the long term continuous dividend purpose, the company should have higher proportion of Total assets under fixed assets or long term assets. The short term assets will mean lower dividend rate and pressure of cash flow. The long term assets will involve long term or permanent securities issue which require higher rate of return and less liquidity. The short term assets requires short term liabilities with lower returns and high liquidity.

The long term assets is also required for the continuous production of the products and generate the revenues and incomes.

So, every service company should always have good proportion of short term assets and on the other hand, production or manufacturing should possess large proportion of long term assets or fixed assets.