ACCA FM Syllabus C. Working Capital Management - Permanent & Fluctuating Current Assets - Notes ^{2 / 5}

When considering how working capital is financed, it is useful to divide assets into non-current assets, permanent current assets and fluctuating current assets.

Permanent current assets

• These represent the core level of working capital investment needed to support a given level of sales. 

  As sales increase, this core level of working capital also increases.

Fluctuating current assets

• These represent the changes in working capital that arise in the normal course of business operations, for example when some accounts receivable are settled later than expected, or when inventory moves more slowly than planned.