Current assets are resources that a company can convert into cash or extract the maximum value over the next year or accounting year. They include cash, cash equivalents, accounts receivable, inventory, short-term investments, previously paid expenses, and marketable securities. These appear in the balance sheet of the company.
As they can be encashed easily, current assets are essential for a business to finance daily business activities and day ongoing expenses. Current assets vary widely depending on the industry and the products sold by the company. However, it is necessary to verify whether the assets qualify the criteria of a current asset—sold, consumed, and exhausted within the current year.
The formula for calculating current assets:
