Glossary

Current assets

What are current assets, really?

Current assets are the assets in a company that are highly likely to be converted into cash within one year or within the company’s normal operating cycle, whichever is longer. They make up a significant part of the balance sheet and show how liquid the company is in the short term.

In short

Get a quick overview.

Current assets are the assets in a company that are highly likely to be converted into cash within one year or within the company’s normal operating cycle, whichever is longer. They make up a significant part of the balance sheet and show how liquid the company is in the short term.

1 Liquid assets – cash on hand and bank balances. Receivables – amounts owed by customers (debtors).

2 Current assets are central to assessing a company’s working capital and liquidity. They provide a picture of the company’s short-term financial position.

3 A classic analysis is to compare current assets with current liabilities. This is done using ratios.

The key angles on the term.

Below you’ll find the key parts of the explanation gathered in the same visual structure as the newer Coherta pages.

Examples of current assets

Cash and cash equivalents - cash on hand and bank balances.
Receivables - receivables from customers (debtors) expected to be paid within one year.
Inventory - raw materials, work in progress and finished goods to be sold.
Short-term securities - shares or bonds purchased with a view to short-term sale.
Prepaid expenses - for example, rent or insurance paid in advance.

Overview

Meaning

Current assets are central to assessing a company’s working capital and liquidity. They provide a picture of how quickly the company can pay its current liabilities without having to raise external financing. The larger the share of the balance sheet made up of easily convertible assets, the better the company’s ability to withstand unexpected expenses.

Ratio to short-term debt

A classic analysis is to compare current assets with short-term debt. This is done using ratios such as the current ratio and quick ratio, which show the company’s short-term ability to meet its obligations.

In short, current assets are an indicator of how well a company can sustain operations and pay bills in the near future.

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