Current assets are defined as
A) cash and cash equivalents.
B) all assets expected to be quickly used by the firm.
C) cash and other assets that the firm expects to sell or consume during the normal operating cycle of a business, usually one year.
D) cash and other assets that the firm expects maintain for a period including the normal operating cycle of a business, usually one year.

Question

Quizplus · Accepted Answer

Current assets are defined as cash and other assets that the firm expects to sell or consume during the normal operating cycle of a business, usually one year. This includes inventory, accounts receivable, and prepaid expenses, in addition to cash and cash equivalents. Option A is too narrow as it only includes cash and cash equivalents. Option B is too general as it includes all assets that are quickly used by the firm, rather than specifically those that will be sold or consumed within a year. Option D is incorrect as it includes assets that will be held for a period longer than the normal operating cycle of a business.

Current Assets Are Defined as