Current asset / Current accounts
What are current assets?
They are business assets that could be turned into cash within 12 months. These would include bank deposits, money-market instruments, investment-grade securities, money owed by customers and stock in trade. The level of current assets is important as an indicator of the firm's ability to meet its bills.
Where have you heard about current assets?
Investors will read about current assets in the balance sheets of the companies in which they are interested. If they use the services of a financial adviser, they may be given the adviser's view of the health of a company's current asset position.
What you need to know about current assets.
Current assets represent a company's liquidity position, the sum total of what it would be able to raise in the next year should that be necessary in order to meet its bills.
Assets such as plant, machinery, real-estate, licences and copyrights are not current but long-term assets, because they cannot readily be turned into cash. Not all current assets are of equal value. Cash in the bank is obviously the most liquid, money due from customers is less so while stock in trade, also known as inventory, can prove difficult to sell, depending on market circumstances.
Find out more about current assets.
To find out more about current assets and what they can tell you about a company's financial health, see our definition of current liabilities.
