Which of the following best describes current assets?

Which of the following best describes current assets?

• A. Assets intended for long-term use
• B. Assets expected to be liquidated in less than a year
• C. Assets that take more than a year to sell
• D. Assets that have lost value over time

Answer: (B)

Current assets are defined as resources that a company expects to convert into cash or use up within one year or one operating cycle, whichever is longer. This classification includes cash and cash equivalents, accounts receivable, inventory, and other short-term assets that are essential to a business's ongoing operations. The expectation of liquidity within a short period is a key characteristic of current assets, making option B the most accurate description. This framework is important for understanding liquidity and funding conditions in companies, providing insight into their operational efficiency and short-term financial health. While long-term assets provide value over extended periods, current assets focus on immediate cash flow needs.

Current assets are defined as resources that a company expects to convert into cash or use up within one year or one operating cycle, whichever is longer. This classification includes cash and cash equivalents, accounts receivable, inventory, and other short-term assets that are essential to a business's ongoing operations. The expectation of liquidity within a short period is a key characteristic of current assets, making option B the most accurate description.

This framework is important for understanding liquidity and funding conditions in companies, providing insight into their operational efficiency and short-term financial health. While long-term assets provide value over extended periods, current assets focus on immediate cash flow needs.