Current Assets on the Balance Sheet
Here are the specific components of current assets on the balance sheet:
1. Cash and cash equivalents:
This includes cash on hand, deposits in checking and savings accounts, and short-term investments that can be easily converted to cash.
2. Marketable securities:
This encompasses investments in stocks, bonds, and other securities that individuals can easily sell for cash.
3. Accounts receivable:
This encompass funds owed to the company by its customers in exchange for goods or services that have been provided or executed.
4. Inventory:
This includes the cost of goods that the company has on hand and is ready to sell.
5. Prepaid expenses:
This includes expenses that the company has paid in advance, such as rent, insurance, and advertising.
6. Other current assets:
This includes any other assets that are expected to be converted to cash within one year, such as deferred tax assets and unearned revenue.
The specific components of current assets may vary depending on the company’s industry and operations.
For example, a retail company may have a large amount of inventory, while a service company may have a small amount of inventory.
Current assets are important for a company’s liquidity, which is its ability to meet its short-term financial obligations. A company with a strong current assets position is more likely to be able to pay its bills on time and avoid financial trouble.
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