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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Current Assets are cash, cash equivalents or assets the company expects to sell, use-up, or convert to cash in the upcoming year
Current assets are one of two broad categories of assets reported on companies' balance sheets - the other is long-term assets. Current assets include:
- Cash
- Inventory: Includes inventory of raw materials, work in progress and finished goods
- Short-term investments that can be converted to cash quickly, such as T-bills held by the company
- Receivables (money owed to a company, usually as payment or goods or services)
- Office Supplies
Net current assets or Working capital, calculated by subtracting current liabilites from current assets, is a measure of the assets the company has at its disposal in the short term to fund operations - other kinds of assets such as equipment, real estate and goodwill are less easily converted to cash.
By the principle of prudence, current assets are reported in the balance sheet at their least favorable valuation. Short-term investments, for example, will be recorded at the value that the firm paid for it or the market value, whichever is lower. It is only after selling the position that the company recognizes any gains. Similarly, inventory of raw materials is valued at the lower of cost of purchase and market price; and inventory of finished goods are recorded at the lower of cost of production and selling price.
Cash And Cash Equivalents
Cash and Cash Equivalents are current assets that are highly liquid and are a company's main source of day to day funds for operations. These includes cash and bank balances which are or can be quickly converted into cash.
Non-Cash Current Assets
Non-Cash Current Assets are equal to all Current Assets minus Cash and Cash Equivalents. This means, they are all assets which are not cash or are not quickly converted into cash. This includes stocks and loans which have fixed durations or must be sold before being turned into cash and cash equivalents.
Other Current Assets
Other Current Assets are non-cash assets which are due within a year. These assets include Accounts Receivable and Prepaid expenses.[1]
Example
- As of 31 December 2007, Pepco Holdings (POM) current assets was up 0.8% to 1,997.1 million. Items included in the current assets section are Cash And Cash Equivalents - $55.1 million , Accounts receivable - $1,278.3 million, Prepaid expenses - $84.8 million and etc
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