Current Assets

Current assets are assets which are assumed to produce economic rewards within a year or within the usual operating cycle of a company.

Current assets and non-current assets are the two forms into which all assets are grouped on a balance sheet. Information about current assets of a company is significant because it assists in assessing the liquidity of a company when compared with current liabilities. Current assets are a significant input in the calculation of current ratio and quick ratio.

Examples

Typical current assets include:

Short-term prepayments
Inventories
Short-term notes receivable
Accounts receivable
Short-term investments
Cash and cash equivalents

Short-term prepayments symbolize advance payments for expenses that are assumed to be incurred in one year.

Inventories are goods which are held by a business for the purpose of production or sale. These include raw material, work-in-progress and finished goods.

Short-term notes receivables symbolize notes receivable that mature in one year.

Accounts receivable represent monies that are yet to be collected from customers. They are presented on balance sheet net of any provision for doubtful debts.

Short-term investments represent investments which a business expects to sell within next twelve months.

Cash and cash equivalents include cash in hand, cash at bank and all such financial instruments which can be readily converted to cash without any significant loss of value.

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