In accounting, a current asset is any asset which can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year (whichever period is longer). Typical current assets include cash, cash equivalents, short-term investments which in the ordinary activity are mainly related to non-strategic companies in the process of being sold (usually as a result of private negotiations), accounts receivable, stock inventory, supplies, and the portion of prepaid liabilities (sometimes referred to as prepaid expenses) which will be paid within a year.[1] In simple words, assets which are held for a short period are known as current assets. Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business. On a balance sheet, assets will typically be classified into current assets and long-term or fixed assets.[2]
The current ratio is calculated by dividing total current assets by total current liabilities.[3] It is frequently used as an indicator of a company's liquidity, which is its ability to meet short-term obligations.[4] The difference between current assets and current liability is referred to as trade working capital.
The quick ratio, or acid-test, measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary. It would not be used for substantial period of time such as, normally, twelve months.
Referencesedit
^J. Downes, J.E. Goodman, "Dictionary of Finance & Investment Terms", Barons Financial Guides, 2003; and J. G. Siegel, N. Dauber & J. K. Shim, "The Vest Pocket CPA", Wiley, 2005.
^Larry M. Walther, Christopher J. Skousen, "Long-Term Assets", Ventus Publishing ApS, 2009
^"Current Ratio Formula - Examples, How to Calculate Current Ratio". Corporate Finance Institute. Retrieved 2019-12-03.
^Peavler, Rosemary. "Calculate Liquidity Position Using Financial Ratio Analysis". The Balance Small Business. Retrieved 2019-12-03.
January 01, 1970
current, asset, this, article, needs, additional, citations, verification, please, help, improve, this, article, adding, citations, reliable, sources, unsourced, material, challenged, removed, find, sources, news, newspapers, books, scholar, jstor, november, 2. This article needs additional citations for verification Please help improve this article by adding citations to reliable sources Unsourced material may be challenged and removed Find sources Current asset news newspapers books scholar JSTOR November 2010 Learn how and when to remove this message In accounting a current asset is any asset which can reasonably be expected to be sold consumed or exhausted through the normal operations of a business within the current fiscal year or operating cycle or financial year whichever period is longer Typical current assets include cash cash equivalents short term investments which in the ordinary activity are mainly related to non strategic companies in the process of being sold usually as a result of private negotiations accounts receivable stock inventory supplies and the portion of prepaid liabilities sometimes referred to as prepaid expenses which will be paid within a year 1 In simple words assets which are held for a short period are known as current assets Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business On a balance sheet assets will typically be classified into current assets and long term or fixed assets 2 The current ratio is calculated by dividing total current assets by total current liabilities 3 It is frequently used as an indicator of a company s liquidity which is its ability to meet short term obligations 4 The difference between current assets and current liability is referred to as trade working capital The quick ratio or acid test measures the ability of a company to use its near cash or quick assets to extinguish or retire its current liabilities immediately Quick assets are those that can be quickly turned into cash if necessary It would not be used for substantial period of time such as normally twelve months References edit J Downes J E Goodman Dictionary of Finance amp Investment Terms Barons Financial Guides 2003 and J G Siegel N Dauber amp J K Shim The Vest Pocket CPA Wiley 2005 Larry M Walther Christopher J Skousen Long Term Assets Ventus Publishing ApS 2009 Current Ratio Formula Examples How to Calculate Current Ratio Corporate Finance Institute Retrieved 2019 12 03 Peavler Rosemary Calculate Liquidity Position Using Financial Ratio Analysis The Balance Small Business Retrieved 2019 12 03 Retrieved from https en wikipedia org w index php title Current asset amp oldid 1165963404, wikipedia, wiki, book, books, library,
