Question

please give 3-5 examples of companies or industries that would have a significant amount of prepaid assets and explain

i am asking this for the 3 rd time and I DO NOT NEED EXAMPLES OF PREPAID EXPENSES
I NEED EXAMPLES OF COMPANIES THAT HAVE MANY PREPAID EXPENSES DUE TO THE NATURE OF THEIR BUSINESS

Answer 1

Solution :

Prepaid expenses are the expenses that are paid in advance for the service to be received in the future.

The following industries tend to have a higher amount of prepaid industries :

1) Jewellery sector :

The precious jewels like diamond, gold, stones, etc. require craftsmanship by skilled persons and these valuables are high valued items for there exisits high competition among the industrial competitors for quality raw materials and good craftsmanship. Hence the artisans like jewelsmiths are often paid in advance for the services to be performed and the amount is also paid to reserve the raw material supply (eg : gold alloy).

The material and labour are the primary cost in the jewellery industry and hence advance payments for the procurement of materials and labour results in high prepaid expenses.

2) Food industry :

It is one of the most prominent sectors. Be it cafes, restuarants or food processing companies, all these industries rely on primary raw materials produced by the agriculturist. The farmers are often paid in advance to enable them to produce the crops as per the requirements.

The primary expenditure in the food industry is the purchase of raw materials.Hence the prepaid expenses is higher, when the payments for raw materials is made in advance.

3) Construction industry :

The construction of a building or any plant requires the use of huge machineries and expenses related to operate the machinery.

The hire charges for these machines are often paid in advance to ensure thei availability.

Also, the construction company needs huge finance and often rely on bank loan to meet the financing requirements. The loans involve huge interest costs which has to be paid even before the loan instalment. Eg : upfront charges while closing a mortgage.

4) Transportation hiring services :

The companies that lend vehicles on hire incur a huge cost on insurance. Since the primary activity is lending, the number of vehicles is also high.The insurance charges are often prepaid resulting in higher prepaid expenses

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