What are current assets?

Current assets are defined as assets that are expected to be converted into cash or used up within one year. This concept is crucial for understanding a company’s liquidity and short-term financial health. Examples of current assets include cash, accounts receivable, inventory, and short-term investments.

This is essential in financial analysis, as a company needs to have enough current assets to cover its short-term liabilities. If a company's current assets exceed its current liabilities, it indicates a favorable liquidity position.

The other choices do not correctly represent current assets. Long-term investments and non-liquid assets do not fit the criteria for current assets and refer instead to other classifications within a company’s balance sheet. Total assets encompass all types of assets—current and non-current—rather than focusing specifically on those that can be quickly converted to cash or consumed within a year. Understanding what constitutes current assets is key for assessing a firm's operational efficiency and financial stability in the short term.