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 assets that are expected to be sold, consumed, or converted into cash within a year or within the normal operating cycle of a business. This includes cash and other assets such as accounts receivable, inventory, and prepaid expenses that the firm expects to use up or sell within the next year. Choice A is incorrect because it only includes cash and cash equivalents, while choice B is too broad and may include assets that are not expected to be used up within a year. Choice D is incorrect as it refers to maintaining assets for a period that includes the normal operating cycle rather than assets that will be converted into cash within that time frame.

Current Assets Are Defined As