CHAPTER ONE
INTRODUCTION
Background of the study
The advent of asset management is a prerequisite to organizational profitability and growth. The management of asset in public limited liability companies has a lot to do with their profitability and so extra caution has to be taken in the management appraisal of these assets to ensure evenness and profitability (Allen 2007).
Current assets as one of the management tolls of business organization are very important in the proper function of business and achievement of profitability of an organization. Current assets are those assets that are readily without depreciation in value and interference in the normal process of the enterprise. Management on the other hand involves getting things done either by oneself or through other people by planning, organizing and coordinating (Reid 2003). It is also a social and technical proves that utilizes resources and changes human behaviors in the desired direction in order to elicit contribution that will accomplish the objectives of the organization.
Current asset management includes – managerial decisions on how the various component of current asset are to be financial as well as planned policies on the composition level to be maintained and control to be exercised(Bond 1998). Current assets comprises of cash, inventories, governments bonds, account reachable mark able securities, prepaid expenses and also other assets that are capable of being converted into cash within a relatively short period without interfering with the normal operations of the business. For an organizational goal to be achieved these components of current assets should be efficiently managed.
But sundry debtors and cash tie-up investment funds can also have other costly disadvantages, for this reason, organizations should always seek to minimize or keep optimum stock and cash level of these assets and ideally reduce them to zero. However, reducing them to zero is rarely practical since to do so will result in cash greater of other adverse costs increased. The determination of the optional level for such assets is therefore the result of balancing process between the cost of holding such assets and role associated with not holding than or of holding only small amount.
It is obvious that any mismanagement of these current assets will result to loss of cash, which will eventually have adverse effects in the entire management of the company(Caridad 2005).
Therefore, any step which can be taken to minimize levels of current assets probably yield large savings in cost. Investigations have shown that many business concerns fail or perform below expectations as a result of the inability to manage their current assets adequately (Bavin 1999). The importance ofwell-coordinated current assets, management cannot be over-exaggerated; it goes a long way to boast productivity, availability of funds, profitability and encourages growth and expansion of the company. The researcher therefore tend to investigate and be able to come out with a profitable result on effective and efficient management of current assets in public limited liability companies and suggest possible ways for further improvement.
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