Current Assets does not include Goodwill, because goodwill is intangible assets and is not included in current assets.
Current assets encompass a range of resources that a company holds, intending to convert them into cash or utilize them within a short period, usually within one year. These assets are crucial for the day-to-day operations of the business and its ability to meet short-term financial obligations. The main components of current assets are as follows:
Current Investments: These are financial instruments that the company plans to sell or convert into cash within a year, including marketable securities and short-term investments.
Inventories: Representing goods or products that the company holds for sale or raw materials used in the production process.
Trade Receivables: Also known as debtors, these are amounts owed to the company by its customers for goods or services sold on credit.
Cash and Cash Equivalents: Including physical currency, cash on hand, and highly liquid assets that are readily convertible into known amounts of cash, typically with maturities of three months or less.
Short-term Loans and Advances: Loans given by the company to other entities or individuals that are expected to be repaid within a year.
Other Current Assets: This category includes items such as prepaid expenses (advance payments for goods or services yet to be received), advance tax payments, accrued income (revenues earned but not yet received), and other short-term assets.
These current assets collectively provide a snapshot of a company's ability to fund its immediate operating needs and manage its short-term liabilities effectively. They play a critical role in maintaining liquidity, supporting day-to-day business activities, and ensuring financial stability. |
