Definition of Current Assets

Current assets or liquid assets are resources that can be converted into liquid cash within a year. The current assets represent the liquidity of a business that means it shows how strong a business is in apposition to repay its short-term liabilities.

Example of Current Assets:

Includes Cash itself, inventories, trade receivables, prepaid expenses, short term investments, and non-current assets held for sale.

Inventories can be raw materials, work in process or finished goods, that can take some time to generate cash, but this time usually takes less than one year so they are called current assets. Trade receivables are the payments against the sales made to customers by a business, that often are collected within one year of the sales. Non-current assets that are now not in the use of a business and are now separated from other fixed assets for selling purposes are also considered as current assets.