Current Assets

Next video:
Loading the player...

Current assets are assets that the company could convert into cash within a year in the normal course of business. Current assets include cash, accounts receivable, inventory, marketable securities, prepaid expenses and anything else that can easily be turned into cash. Current assets are used to calculate financial ratios such as the current ratio, which divides current assets by current liabilities. To see any company’s current assets, just look at its balance sheet.

John owns a small publishing company. Here are what his company’s current assets consist of:

Cash from sales - $30,000.

Money in checking and savings accounts - $50,000.

Short-term investments; in this case, U.S. Treasuries - $50,000.

Accounts receivable, or payments the company is waiting to receive for publishing services sold on credit - $20,000.

Inventory: $0, because John publishes e-books and does only print-on-demand for paper and hardback books.

Prepaid expenses - Payments for services John’s company expects to receive in the near future. These include rent - $0, because John operates out of a home office, $2,000 in professional insurance premiums, and $10,000 in taxes.

Total current assets: $162,000

Not included in John’s current assets are items that will not be converted into cash, sold or consumed within a year - such as John’s computers, office furniture, and the value of his solid reputation in the publishing world.

Related Articles
  1. Economics

    Common Size Balance Sheet

    Investopedia explains: A common size balance sheet is a valuable tool for tracking and analyzing the changes and performance of a business over multiple time periods.
  2. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  3. Personal Finance

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  4. Investing Basics

    How To Evaluate A Company's Balance Sheet

    Asset performance shows how what a company owes and owns affects its investment quality.
  5. Fundamental Analysis

    Understanding The Federal Reserve Balance Sheet

    We are all connected to the Fed's balance sheet, and the currency notes that we hold are its liabilities.
  6. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  7. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  8. Stock Analysis

    Why did Wal-Mart's Stock Take a Fall in 2015?

    Wal-Mart is the largest company in the world, with a sterling track-record of profits and dividends. So why has its stock fallen sharply in 2015?
  9. Professionals

    4 Must Watch Films and Documentaries for Accountants

    Learn how these must-watch movies for accountants teach about the importance of ethics in a world driven by greed and financial power.
  10. Investing News

    Should You Invest in Disney Stock Before Star Wars?

    The force is strong with Disney stock, as it continues to make gains going into the launch of EP7. But is this pricey stock a good buy at these levels?

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center