1. What are Current Assets?

Current assets are all assets that a company expects to convert to cash within one fiscal year or operating cycle. They represent the short-term resources available to a business for meeting its current obligations and funding day-to-day operations.

2. How to Calculate Current Assets

The formula for calculating current assets is:

Where:

• Cash — Includes physical currency, bank accounts, and cash equivalents
• Receivables — Amounts owed to the company by customers (accounts receivable)
• Inventory — Raw materials, work-in-progress, and finished goods ready for sale
• Other Current Assets — Prepaid expenses, short-term investments, and other liquid assets

3. Importance of Current Assets

Details: Current assets are crucial for assessing a company's liquidity and short-term financial health. They are used to calculate important financial ratios like the current ratio and working capital.

4. Using the Calculator

Tips: Enter all values in the same currency unit. The calculator sums up all components to give you the total current assets. Values should be from the same balance sheet date for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between current and non-current assets?
A: Current assets are expected to be converted to cash within a year, while non-current assets (like property, plant, equipment) are long-term resources.

Q2: How do current assets relate to working capital?
A: Working capital = Current Assets - Current Liabilities. It measures a company's short-term liquidity.

Q3: What is a good current ratio?
A: Generally, a current ratio (Current Assets/Current Liabilities) between 1.5 and 3 is considered healthy, though this varies by industry.

Q4: Should inventory always be included in current assets?
A: Yes, unless it's obsolete or unsellable, in which case it should be written down or written off.

Q5: Are prepaid expenses really assets?
A: Yes, prepaid expenses (like insurance paid in advance) are current assets because they represent future economic benefits.