Current asset

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In accounting, a current asset is any asset reasonably expected to be sold, consumed or used up through the normal operations of the business within one year or one operating cycle whichever is longer. 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.[1]

On a balance sheet, assets will typically be classified into current assets and long-term assets.

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.

References[edit]

  1. ^ 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.