| Part ofa series on |
| Accounting |
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People and organizations |
Inaccounting, acurrent asset is anasset that can reasonably be expected to be sold, consumed, or exhausted through the normal operations of a business within the currentfiscal year, operating cycle, or financial year. In simple terms, current assets are assets that are held for a short period.
Current assets includecash,cash equivalents, short-term investments in companies in the process of being sold,accounts receivable, stockinventory, supplies, and theprepaid liabilities that will be paid within a year.[1] Such assets are expected to be realised in cash or consumed during the normal operating cycle of the business. On abalance sheet, assets will typically be classified into current assets and long-termfixed assets.[2]
Thecurrent ratio is calculated by dividing total current assets by totalcurrent liabilities.[3] It is frequently used as an indicator of a company'saccounting liquidity, which is its ability to meet short-term obligations.[4] The difference between current assets and current liability is referred to astrade working capital.
Thequick ratio, or acid-test ratio, measures the ability of a company to use its near-cash or quick assets to extinguish or retire itscurrent liabilities immediately. Quick assets are those that can be quickly turned into cash if necessary and may not be used for a substantial period of time such as twelve months.
