Current Assets
Assets expected to be converted to cash or used within one year.
Current assets include cash, accounts receivable, inventory, prepaid expenses, and short-term investments. They are listed on the balance sheet in order of liquidity. The ratio of current assets to current liabilities (current ratio) is a primary measure of short-term financial health and a business's ability to meet upcoming obligations.
Example
A retail store's current assets include $15,000 cash, $22,000 in receivables, $45,000 in inventory, and $3,000 in prepaid insurance—totaling $85,000.
Why It Matters for Your Business
Current assets determine whether you can pay your bills in the near term, so a healthy ratio relative to current liabilities means your business has adequate liquidity.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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