CURRENT ASSET Meaning and
Definition
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A current asset refers to a category of assets that represent the resources possessed by a business entity, expected to be utilized or converted into cash within a relatively short period, typically within one year. These assets are considered crucial for the company's day-to-day operations and are expected to be consumed, sold, or settled within the ordinary course of business operations.
Current assets are reported on a company's balance sheet and are generally more liquid compared to other types of assets. They are routinely measured at their fair market value or the lower of cost or net realizable value. Examples of current assets include cash and cash equivalents, accounts receivable, inventory, short-term investments, prepaid expenses, and marketable securities, among others.
Cash and cash equivalents encompass physical currency, bank accounts, and highly liquid investments such as certificates of deposit and treasury bills. Accounts receivable are amounts owed to the company by its customers for providing goods or services on credit. Inventory represents raw materials, work-in-progress, and finished goods held by the company for sale. Prepaid expenses include advance payments made for services, supplies, or insurance coverage. Marketable securities are short-term investments in publicly traded stocks or bonds.
Understanding a company's current assets is crucial for assessing liquidity, financial health, and short-term solvency. By evaluating these assets and the efficiency with which they are managed, stakeholders can make informed decisions regarding investments, loan approvals, and other financial transactions.
Common Misspellings for CURRENT ASSET
- xurrent asset
- vurrent asset
- furrent asset
- durrent asset
- cyrrent asset
- chrrent asset
- cjrrent asset
- cirrent asset
- c8rrent asset
- c7rrent asset
- cuerent asset
- cudrent asset
- cufrent asset
- cutrent asset
- cu5rent asset
- cu4rent asset
- cureent asset
- curdent asset
- curfent asset
- curtent asset
Etymology of CURRENT ASSET
The term "current asset" consists of two words: "current" and "asset".
The word "current" originated from the Latin word "currere", which means "to run". In the financial context, it refers to items that are expected to be converted into cash, sold, or consumed within a year or the operating cycle of a business, whichever is longer.
The word "asset" comes from the Old French word "asetz", which means "enough". It further derived from the Latin word "ad satis", translating to "to enough". In the financial context, an asset refers to any resource that has economic value and is expected to provide future benefits to a company or individual.
Combining both terms, "current asset" refers to those assets which are expected to be converted into cash or used up within a year or the operating cycle of a business.
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