Current Assets

Current Assets Definition

What are current assets? Current assets are items of value that a company plans to either use or sell within one year. This includes cash and investments, inventory, and accounts receivable. These assets are important because they can be used to fund day-to-day operations and short-term obligations.

Current assets are a key component of a company’s balance sheet, which is a snapshot of a business’s financial health. They give investors an idea of how well a company is managing its resources and whether it will be able to meet its short-term obligations.

There are several types of current assets, each with its own characteristics:

Cash and cash equivalents: This is the most liquid form of current asset, as it can be easily converted into cash. Examples include checking and savings accounts, money market accounts, and certificates of deposit.

Inventory: This refers to the raw materials, finished goods, and work-in-progress that a company has on hand. It can be difficult to convert inventory into cash quickly, so it’s important to manage it carefully.

Accounts receivable: Accounts receivable are amounts owed to a company by its customers for goods or services that have been delivered. They typically come due within 30 days, so they’re considered fairly liquid. However, if customers don’t pay their invoices on time, it can cause cash flow problems for businesses.

Short-term investments: Short-term investments are securities