How Do I Choose the Best Illiquid Assets?

The corporate asset portfolio refers to the proportion of current assets and non-current assets in the total corporate assets. Enterprise assets can be divided into current assets and non-current assets according to their nature and existence in production and operation. Among them, current assets include cash, short-term investments, receivables, and inventory; non-current assets include fixed assets, long-term Investment, intangible assets and deferred assets. Asset portfolio is an important part of optimizing asset structure and working capital management.

Corporate asset portfolio

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The corporate asset portfolio refers to the proportion of current assets and non-current assets in the total corporate assets. Enterprise assets can be divided into current assets and non-current assets according to their nature and existence in production and operation. Among them, current assets include cash, short-term investments, receivables, and inventory; non-current assets include fixed assets, long-term Investment, intangible assets and deferred assets. Asset portfolio is an important part of optimizing asset structure and working capital management.

Chinese name

Corporate asset portfolio

Foreign name

Business portfolio

What is a corporate asset portfolio

The corporate asset portfolio refers to the proportion of current assets and non-current assets in the total corporate assets. Enterprise assets can be divided into current assets and non-current assets according to their nature and existence in production and operation. Among them, current assets include cash, short-term investments, receivables, and inventory; non-current assets include fixed assets, long-term Investment, intangible assets and deferred assets. Asset portfolio is an important part of optimizing asset structure and working capital management.

(1) Risk and reward Generally speaking,

The amount of current assets of an enterprise can be divided into two parts according to its function: Normal requirements. It refers to the current assets occupied to meet the needs of normal production and operation.

2. The amount of insurance reserves. It refers to current assets that are reserved to deal with unexpected situations that occur outside the normal production and operation requirements.

(1) Moderate asset portfolio

A moderate portfolio strategy is to keep a certain amount of insurance reserves in case of normal needs to prevent accidents. The B-level liquid asset investment strategy in the figure is a moderate portfolio strategy. When adopting a moderate portfolio strategy, the company's returns are average and the risks are average. Under normal circumstances, companies use this strategy.

(II) Conservative asset portfolio

When arranging the amount of current assets, some companies add a portion of the extra reserves to the normal production and operation requirements and normal insurance reserves in order to reduce the risk of the enterprise. This is a conservative asset portfolio strategy. Strategy A in the figure is a conservative combination strategy. When adopting a conservative portfolio strategy, the company's return on investment is generally low and the risks are also small. Financial managers who are unwilling to take risks and prefer safety will like this strategy.

(III) Risky asset portfolio

When arranging the amount of current assets, some enterprises arrange only the normal production and operation requirements and not or only a small amount of insurance reserves in order to improve the return on investment of enterprises. This is a risky portfolio strategy. Strategy C in the figure is a risky portfolio strategy. When adopting a risky strategy, the company's return on investment is high but the risk is relatively large. Financial managers who dare to take risks and prefer to pay generally adopt this combination strategy.

The impact of different corporate asset portfolios on corporate returns and risks

The fixed assets and current assets of an enterprise have different effects on the risks and returns of the enterprise. Investing more in current assets can reduce a company's financial risk. This is because when an enterprise fails to pay its debts in a timely manner, current assets can be quickly converted into cash to pay off its debts. However, if excessive investment in current assets results in relatively idle current assets and relatively insufficient fixed assets, this will reduce the company's production capacity and reduce corporate profits. In short, under the condition that the total assets and financing portfolio remain unchanged, if fixed assets decrease and current assets increase, it will reduce the risk of the enterprise, but also reduce corporate profits; conversely, if fixed assets increase, current assets decrease, Will increase the risk and profit of the enterprise. Therefore, when determining the asset portfolio, there is a trade-off between risk and reward.