Importance of Such a Concept within the World of Operational Management - Term Paper Example

?Whereas asset management is necessarily one of the primal duties that any manager must necessarily engage in, asset management cannot and should notbe understood as something of a monolithic term. Accordingly, both long and short term assets exist. Oftentimes, within the realm of asset management, the reader or individual is led to the belief that nearly all asset management must necessarily be long-term. However, the fact of the matter is that short-term asset management is a process that requires a far higher percentage of the manager’s time than does long-term asset management. Although the planning and implementation stage of long-term management is something that necessitates careful analysis, short-term asset management is a process that must be engaged with each and every day and at almost every juncture of the business process. In such a way, in order to understand this continual process of short-term asset management, the preceding analysis will review, define, and project the ways in which short-term management of assets takes place within a typical firm and the means by which its comes to be of extreme importance. Through such an analysis, it is the hope of this author that the reader will gain a more definitive understanding of what short-term asset management means and the way in which they can have both a positive and detrimental impact upon the level to which a given firm/entity/organization can hope to compete within the current market. Within its most basic definition, a short term asset is an asset that is to be sold and converted into liquid currency within the space of one year’s time. Although there are exceptions to this “one year” rule, the broad majority of industry and business ascribes to this calendar year definition as a means of delineating short term assets from long term assets. As can be seen by such a broad definition, the level of asset management that must necessarily be engaged with as a means of drawing a degree of profitability from such a practice is necessarily of dire importance. Moreover, whereas the long term asset management process entails a high degree of planning and forethought, short term asset management must be concentric upon key timing and a perennial awareness of how financial actions and decisions will ultimately affect the bottom line of the firm (Hay & Lourie, 1996). Within this particular understanding, the analyst/reader is able to come to the conclusion that short term asset management encompasses a very large part of the day to day financial decision making structure that defines the way in which a manager or firm integrates with the outside world and the business process/resources at her/her disposal. Whereas all assets facilitate the financial structure and process of a business in one way or another, the reality of the matter is that the day to day liquidation and management of short term assets is one of the most effective means by which liabilities and debts can be managed by incremental decisions made to leverage the way in which short term assets are handled and applied. Within such a scope of understanding, short term assets can be defined as cash, inventory, prepaid expenses, accounts receivable, marketable securities, and a variety of other items. As can be seen from the shear scope of the list, the level to which effective management of each of these tools is of vital importance with regards to deciding whether or not a firm or entity will be viable. From an even broader perspective, it can be noted with regards to business management that many times an entity succeeds or fails not based upon its overall level of profitability, as a percentage of overall investment, but as a function of the fact that effective budgeting, tracking of income and outflow is not managed correctly. As such, short term management necessarily lends the reader to understand a certain level of the importance of cash flow as a means of keeping any business or entity viable (Mouritsen, 2011). Although the preceding list is helpful in understanding asset management and the sheer scope in which it applies to business and accounting, the fact of the matter is that depending on the focus of the particular entity in question, short-term asset management can go far beyond the textbook explanation which has herein been given. In this way, the overall importance that short-term asset management has with regards the operating cycle the business comes into clear focus. Although there are many aspects of short-term asset management it must be engaged with, perhaps the most important is with regards to the unit of time measure that defines the operating cycle. As has been noted, typically one year is the cut off for the point of which is short-term asset will then be transitioned into a long-term asset. However beyond merely denoting a deadline for asset development and management, this understanding also engages the analyst with an appreciation for the means whereby short-term asset management has a direct and present impact upon the means by which a business operates. Within the discussion which is herein been elaborated upon, the reader can come to a firm level of overall understanding with regards to the continually evolving process and prescient need that short-term asset management has with regards to an entity. The manager who engages in such a process must not only have a clear and definitive understanding of the means by which these assets are categorized, key/she must also be forever ready and able to differentiate assets between short and long-term. Moreover, the need to keep current and updated information with regards to these continually changing short-term assets is perhaps the most important practice of all. Although a certain level of analysis could of course be concentric upon the way in which assets are managed, the more important level of understanding from the financial/accounting standpoint is whether or not the updated values are currently in place with regards to the short-term assets and how they are. All too often, the business manager fails in his/her enterprise due to the fact that they do not put a high level of emphasis upon maintaining accurate and up-to-the-minute accounting for the ever-changing levels of cash, inventory, prepaid expenses, accounts receivable, marketable securities, and a variety of other items that necessarily define short-term asset management (Giandomenico, 2011). In such a way, a more appropriate and actionable level of management must necessarily be concentric upon attempting to define and record all information that is pertinent to such a definition as a means of providing a further level of profitability and success for the given entity/organization/firm in question. Although there are many aspects of business management and accounting/finance that the business manager must engage with, from the information which is been given within this analysis it is clear that short-term asset management is perhaps the most important of any of the day-to-day decisions that can be made within a given business entity. In such a way, rather than merely being concentric upon the big picture, short-term asset management requires the business manager to be both organized and perennially mindful of the small monetary/inventory and other financial changes that impact upon business on a daily basis. However, rather than merely laying a level of analysis solely upon the minute details of the business process, short-term asset management can be defined and understood within the context of the overall level to which the business entity is able to present a unified and well informed decision-making structure within the business market. References Giandomenico, R. (2011). Asset Liability Management. IUP Journal Of Bank Management, 10(4), 31-46. Hay, D., & Louri, H. (1996). Demands for short-term assets and liabilities. Applied Financial Economics, 6(5), 413-420. doi:10.1080/096031096334042 Mouritsen, M. (2013). Is Your Organization Managing or Mangling Its Assets?. Strategic Finance, 95(1), 35-41. Read More