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Current Asset: Definition and Meaning
Definition
A current asset is an asset expected to be converted to cash, sold, or used within one year or the normal operating cycle, whichever is longer.
Why It Matters
Current assets are important to liquidity and working-capital analysis. Common current assets include cash, accounts receivable, inventory, prepaid expenses, and short-term investments.
Management should consider the quality and timing of current assets. A large receivable balance may not improve liquidity if collections are slow, disputed, or doubtful.
Example
Cash, customer invoices due within 30 days, and inventory expected to be sold in the near term are current assets.
Related Terms
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