Current Assets

Current assets are defined as cash or any other asset which can be reasonably converted to cash within one year. Current assets include items like cash, marketable securities, short-term investments, accounts receivable / debtors, prepaid expenses, inventory, short term loans.

Any other items like restricted cash (that is, cash that cannot be withdrawn or used for current operations), depreciable assets, receivables that are not due in 12 months or less are not current assets. Instead they are fixed assets.

Current assets are important because they indicate how much assets the company has in the form of cash and liquid assets to which it can have access in the next 12 months, apart from external sources. It indicates the liquidity level of the company and also helps us to analyse how well the company is using its funds in the ongoing and day-to-day operations.