Current Assets

Cash or other assets that are expected to be sold, collected, or used within the longer of one year or the company's operating cycle. The way current assets are structured is important in determining the company’s short term ability to pay its debts.

For instance, cash, cash and equivalents and temporary investments are more liquid than accounts receivable, notes receivable and merchandise inventory. We know that cash and short term investments can be used to pay off debts, pay suppliers, employees’ wages, etc. However, merchandise inventory and accounts receivable must be converted in to cash before they are any good to the company.

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