What are Current Assets?

Current Assets are the type of assets found on a company’s balance sheet. These assets are expected to be converted into cash or used up within one year or one operating cycle, whichever is longer. Current Assets are crucial for a company’s day-to-day operations and liquidity, as they represent resources that can be readily accessed to meet short-term obligations and fund ongoing business activities.

Examples of current assets include:

• Cash and Cash Equivalents: Includes physical currency, demand deposits, and other highly liquid assets that can be quickly converted into cash with minimal risk of loss in value.
• Accounts Receivable: Includes amounts owed to the company by customers for goods or services provided on credit. These receivables represent future cash flows that the company expects to receive within a relatively short period.
• Inventory: Includes goods held for sale in the ordinary course of business, including raw materials, work-in-progress, and finished goods. Inventory is expected to be sold or used up in the near term to generate revenue.
• Prepaid Expenses: Includes payments made in advance for goods or services that will be received in the future. Common examples include prepaid rent, insurance premiums, and prepaid subscriptions.
• Marketable Securities: Includes short-term investments that can be easily bought or sold in the financial markets, such as treasury bills, commercial paper, and money market funds. These investments provide the company with additional liquidity while earning a return on idle funds.
• Other Current Assets: This category may include miscellaneous assets that do not fit into the above classifications but are expected to be converted into cash or used up within one year. Examples may include advances to suppliers or employees, and certain tax assets.

Fixed Assets and Current Assets are two types of assets found on a company’s balance sheet, each representing different types of resources owned by the company. Fixed Assets are long-term assets that are not expected to be converted into cash or consumed within one year of the balance sheet date; whereas, Current Assets are assets that are expected to be converted into cash or used up within one year or one operating cycle, whichever is longer.