Which term describes assets that can be converted to cash within one year?

Which term describes assets that can be converted to cash within one year?

• A. Current Assets or Short-Term Assets
• B. Securities
• C. Fixed Assets or Long-Term Assets
• D. Intangible Assets

Answer: (A)

Current assets are assets that can be converted to cash within one year or within the operating cycle, whichever is longer. This category includes items like cash, accounts receivable, inventory, and other short-term investments. They show a company’s liquidity—its ability to meet short-term obligations. In contrast, long-term or fixed assets such as property, plant, and equipment are held for many years and aren’t intended to be quickly converted to cash. Intangible assets, like patents or goodwill, are non-physical and don’t typically convert to cash quickly. Securities can be short-term or long-term investments, but the category defined by being convertible to cash within a year is current assets.

Current assets are assets that can be converted to cash within one year or within the operating cycle, whichever is longer. This category includes items like cash, accounts receivable, inventory, and other short-term investments. They show a company’s liquidity—its ability to meet short-term obligations. In contrast, long-term or fixed assets such as property, plant, and equipment are held for many years and aren’t intended to be quickly converted to cash. Intangible assets, like patents or goodwill, are non-physical and don’t typically convert to cash quickly. Securities can be short-term or long-term investments, but the category defined by being convertible to cash within a year is current assets.