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In accounting, a current asset is an asset which can either be converted to cash or used to pay current liabilities within 12 months. Typical current assets include cash, cash equivalents, short-term investments, accounts receivable,stock inventory and the portion of prepaid liabilities which will be paid within a year.
The current ratio is calculated by dividing total current assets by total current liabilities. It is frequently used as an indicator of a company's liquidity, its ability to meet short-term obligations.
- 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.