CURRENT ASSETS Meaning and
Definition
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Current assets refer to a category of assets on a company's balance sheet that can be converted into cash or used up within one year or a normal operating cycle, whichever is longer. These assets are essential for a company's day-to-day operations and include both liquid assets and items that will be converted into cash in the near future.
The most common types of current assets include cash and cash equivalents, accounts receivable, inventory, and prepaid expenses. Cash and cash equivalents refer to physical currency, bank accounts, and short-term investments that can be easily converted into cash. Accounts receivable represents the payments due from customers for goods or services provided on credit. Inventory refers to the company's stock of products, raw materials, or supplies that are held for future sale. Prepaid expenses are expenses that have been paid in advance but will be used or consumed within the next year, such as prepaid insurance or rent.
Current assets are crucial for a company's liquidity and operating activities as they provide the necessary resources to meet its short-term obligations and fund ongoing operations. Furthermore, they are indicators of a company's ability to manage and generate cash flow. Analysts and investors often analyze the composition and growth of a company's current assets to assess its overall financial health, solvency, and liquidity.
Common Misspellings for CURRENT ASSETS
- xurrent assets
- vurrent assets
- furrent assets
- durrent assets
- cyrrent assets
- chrrent assets
- cjrrent assets
- cirrent assets
- c8rrent assets
- c7rrent assets
- cuerent assets
- cudrent assets
- cufrent assets
- cutrent assets
- cu5rent assets
- cu4rent assets
- cureent assets
- curdent assets
- curfent assets
- curtent assets
Etymology of CURRENT ASSETS
The term "current assets" has a straightforward etymology that reflects its meaning. The word "current" comes from the Latin word "currere", meaning "to run", which has a figurative sense of "to flow". It implies the idea of something that is in constant motion or flow. In the business context, "current" refers to assets that are expected to be converted into cash or used up within a relatively short period, usually one year.
On the other hand, "assets" comes from the Old French word "acetz", meaning "enough", which is derived from the Latin word "ad" (to) and "satis" (enough). "Assets" refers to economic resources or properties capable of providing future benefits to an individual or organization.
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