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Current Assets: Complete List With Examples

Updated: May 27, 2022By: Kathy Haan

Current assets are cash or other assets which are seen as possible to liquidate within the next 12 months. There are five types of current assets, which include inventories, cash and equivalents, short and long-term investments, prepaid expenses, and accounts receivable.

Close up of fountain pen on a balance sheet

What Are Current Assets?

A current asset is cash or assets that are seen as possible to withdraw/liquidate within the next year. These are positioned at the beginning of the balance sheet, and include the following accounts:

  • Cash and equivalents
  • Inventories
  • Short and long-term investments
  • Prepaid expenses
  • Accounts receivable

Non-Current Assets

Assets that are not expected to be convertible to cash within the next 12 months are considered non-current assets. These include tangible assets like:

  • Natural resources
  • Machinery
  • Equipment
  • Land
  • Property
  • Timber
  • Fossil fuels
  • Intangible assets like patents

These are examples of assets not normally easily disposed of.

Key Takeaway: Formally, if an asset isn't expected to be cashable within a year, it isn’t considered a current asset.

Why Current Assets Matter

In business, a company needs assets to be able to operate. For example, cash is needed for things like wages or rent. If there are not enough liquid assets available, the company might run into trouble if it can't pay its bills. If a company can't pay its bills, creditors can come after it, causing financial and reputational damage, and potentially resulting in a liquidation or other bankruptcy status.

Current assets are tracked separately from other assets, and contribute towards a company's liquidity position. Liquidity shows that the company can pay ongoing operating costs and current expenses—without getting behind on bills because it can sell current assets to pay a debt if necessary.

This differs from noncurrent assets, which include things like equipment, real estate, and intellectual property—these are seen as long term assets that are less likely to be divested quickly, easily, and/or at a fair economic value..

Key Takeaway: The financial value of current assets can be used by companies to pay for day-to-day operating expenses.

List of Current Assets

Not all assets are considered current assets. These must be assets or cash that expect to be sold or consumed within one year.

  • Cash and equivalents: These are the most “current” out of all current assets because they are liquid. An investment counts as a cash equivalent when it has a short maturity of 90 days or less and carries an insignificant risk of the value not being realized. If the maturity is more than 90 days, it does not count as a cash equivalent. For example, preferred shares with a short maturity period and specific recovery date.

  • Inventories: Raw materials, in-progress products, and finished goods all count as inventory. However, some inventory can be far less liquid than others. For example, a company might produce million-dollar machinery that doesn’t get sold within a year. Similarly, a company that produces shovels may sell all of its inventory in the winter.

  • Prepaid expenses: While prepaid expenses aren’t convertible to cash, they still count as current assets because they're already paid. An example of this is when a company pays for its insurance premium or rent.

  • Accounts receivable: This is when a company is owed money. If a company lets customers pay over time (like one does with a credit card), then some of the accounts receivables may not qualify for inclusion in current assets. Accounts receivables are current assets as long as they can be paid within a year. For example, a plane manufacturer invoices its airline client after providing replacement parts.

  • Stocks and other marketable securities: A company can sell marketable securities held by it and have cash within a very short period of time, which makes this a current asset. For example, a company can sell its stock investments in other companies before market close and have that cash available in the trade date plus three business days (T+3).

  • Supplies: Some supplies can be counted as current assets if those supplies are expected to be used within 12 months. For example, a major soap company might stock up on green, orange, and black mica powder in June so they can make Halloween soap in July and August.

Current Asset Formula

The current asset formula is simple:

Cash and cash equivalents

+ Accounts receivables

+ Inventory

+ Marketable securities

+ Prepaid expenses

+ Other liquid assets

= Current Assets

To locate the components of this formula, you must look at the balance sheet. These are located at the top of the sheet under the section titled “assets.” At the top of the assets section are current assets, followed by long-term assets.

Ratios Using Current Assets

Ratios help measure a company’s liquidity and give investors a real look at how a company is doing. The most common liquidity ratios used include the current ratio, the quick ratio, and the cash ratio.

  • Current ratio: The current ratio measures a company's amount of current assets against its amount of current liabilities. It can help investors assess the company's near-term liquidity strength. To calculate current ratio, divide the current assets by current liabilities.

  • Quick ratio: The quick ratio measures a company's amount of liquid assets against its amount of current liabilities. can pay off its short-term costs. It can help investors assess how able the company is to pay off its current debt especially in a situation of potential business disruption. There are two ways to calculate quick ratio. The first is to subtract inventory and prepaid expenses from current assets, then divide by current liabilities. The other formula is to count cash, cash equivalents, marketable securities, and accounts receivable and then divide that number by current liabilities.

  • Cash ratio: The cash ratio measures how much money a company has to pay for its short-term bills. It is calculated by dividing the company's cash and cash equivalents by its current liabilities.

Bottom Line

Current assets are assets that can be turned into cash (or its equivalent). These can include bank accounts, receivables due from customers, goods to sell, and items a company has paid for but not used yet. Current assets are used by companies to pay for near-term operating expenses.

This article was written by

Kathy Haan profile picture
Kathy Haan is a former financial advisor and now works full-time as a writer and business coach. Her expertise is in credit unions, 401ks, pensions, insurance, personal finance, and insurance. She has her MBA and has lent her expertise to Forbes, USA Today, and HuffPost.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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