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The assets that can be converted into cash within a short period (i.e. 1 year or less) are known as
- a)Current assets
- b)Fixed assets
- c)Intangible assets
- d)Investments
Correct answer is option 'A'. Can you explain this answer?
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Verified Answer
The assets that can be converted into cash within a short period (i.e....
Current assets is a balance sheet item that represents the value of all assets that can reasonably expect to be converted into cash within one year. Current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses. and other liquid assets that can be readily converted to cash.
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The assets that can be converted into cash within a short period (i.e....
Current Assets:
Current assets are assets that can be converted into cash within a short period, typically 1 year or less. These assets are crucial for a company's day-to-day operations and liquidity.
Examples of Current Assets:
- Cash and cash equivalents
- Accounts receivable
- Inventory
- Prepaid expenses
- Marketable securities
Importance of Current Assets:
Current assets play a vital role in determining a company's ability to meet its short-term obligations. By having a sufficient amount of current assets, a company can ensure that it can pay off its current liabilities as they come due.
Distinguishing Current Assets from Other Asset Categories:
- Fixed assets, such as property, plant, and equipment, are long-term assets that are not easily converted into cash within a short period.
- Intangible assets, such as patents and trademarks, are non-physical assets that do not have a ready market value and may not be easily converted into cash.
Conclusion:
In conclusion, current assets are essential for a company's financial health as they provide the necessary liquidity to meet short-term obligations. By monitoring and managing current assets effectively, a company can ensure its ability to operate smoothly and sustainably.
Current assets are assets that can be converted into cash within a short period, typically 1 year or less. These assets are crucial for a company's day-to-day operations and liquidity.
Examples of Current Assets:
- Cash and cash equivalents
- Accounts receivable
- Inventory
- Prepaid expenses
- Marketable securities
Importance of Current Assets:
Current assets play a vital role in determining a company's ability to meet its short-term obligations. By having a sufficient amount of current assets, a company can ensure that it can pay off its current liabilities as they come due.
Distinguishing Current Assets from Other Asset Categories:
- Fixed assets, such as property, plant, and equipment, are long-term assets that are not easily converted into cash within a short period.
- Intangible assets, such as patents and trademarks, are non-physical assets that do not have a ready market value and may not be easily converted into cash.
Conclusion:
In conclusion, current assets are essential for a company's financial health as they provide the necessary liquidity to meet short-term obligations. By monitoring and managing current assets effectively, a company can ensure its ability to operate smoothly and sustainably.
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Community Answer
The assets that can be converted into cash within a short period (i.e....
Current assets is a balance sheet item that represents the value of all assets that can reasonably expect to be converted into cash within one year. Current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses. and other liquid assets that can be readily converted to cash.
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The assets that can be converted into cash within a short period (i.e. 1 year or less) are known asa)Current assetsb)Fixed assetsc)Intangible assetsd)InvestmentsCorrect answer is option 'A'. Can you explain this answer?
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