The order of liquidating current assets is:
(A) Prepaid Expenses
(B) Finished goods inventory
(C) Raw Material
(D) Cash at Bank
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (D), (B), (C), (A)
(D) Cash at Bank — first. Liquidity means how quickly an asset can be turned into cash. Cash at bank is already money, so it is the most liquid current asset.
(B) Finished goods inventory — second. Finished goods only need to be sold to bring in cash.
(C) Raw Material — third. Raw material must first be made into finished goods and then sold. It takes longer to become cash.
(A) Prepaid Expenses — last. An expense paid in advance never comes back as cash. The business only receives the service later, so this is the least liquid current asset.
NCERT (2026-27 Edition): “Working Capital … Examples of current assets, in order of their liquidity, are as under. |