Current Assets

Current Assets (Definition)

Current assets are assets that are expected to be converted to cash or used up within one year or one business cycle, whichever is longer.

Key aspects of current assets include:

1. Include cash, cash equivalents, accounts receivable, inventory, and prepaid expenses
2. Represent the most liquid assets on a companys balance sheet
3. Used to fund day-to-day operations and pay current expenses
4. Important for calculating working capital and liquidity ratios
5. Higher current assets generally indicate better short-term financial health
6. Management of current assets is crucial for maintaining operational efficiency
7. The composition of current assets can vary significantly between industries

Effective management of current assets is essential for maintaining a companys liquidity and operational capabilities.