Current assets are short-term assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle—whichever is longer. These assets are essential for maintaining day-to-day operations and ensuring that a business can meet its short-term financial obligations.

Common examples of current assets include:

• Cash and cash equivalents (e.g., bank balances, money market accounts)

• Accounts receivable (money owed by customers)

• Inventory (raw materials, work-in-progress, and finished goods)

• Prepaid expenses (like insurance or rent paid in advance)

• Short-term investments

Current assets are listed on the balance sheet in order of liquidity, with the most liquid (cash) appearing first. They are a critical component of a company’s working capital, which is calculated as current assets minus current liabilities. Strong working capital indicates good short-term financial health and operational efficiency.

Monitoring current assets helps business owners and managers manage cash flow, assess credit risk, and make informed investment or operational decisions. If current assets fall short of current liabilities, the business may struggle to pay its bills or fund operations.

In summary, current assets play a vital role in supporting business continuity and financial stability in the short term.