Current Assets - Essential Guide to Business Liquidity Management

What Are Current Assets?

Current assets are resources that a company expects to convert to cash or use up within one year or one business cycle, whichever is longer. These assets are essential for day-to-day business operations and maintaining liquidity.

Key Characteristics:

High liquidity and convertibility to cash
Essential for operational efficiency
Short-term nature (usually within 12 months)
Direct impact on working capital

Types of Current Assets

Cash and Cash Equivalents

Includes physical currency, bank balances, and highly liquid investments with maturities of three months or less.

Accounts Receivable

Money owed to a company by its customers for goods or services delivered but not yet paid for.

Inventory

Raw materials, work-in-progress, and finished goods held for sale in the normal course of business.

Marketable Securities

Short-term investments that can be quickly converted to cash, such as stocks, bonds, or money market instruments.

Prepaid Expenses

Payments made in advance for goods or services to be received in the future.

Understanding Current Assets in Financial Management

What Are Current Assets?

Key Characteristics:

Types of Current Assets

Cash and Cash Equivalents

Accounts Receivable

Inventory

Marketable Securities

Prepaid Expenses

Current Assets Calculator

Current Ratio

Working Capital

Real-World Examples

Frequently Asked Questions