![]() Marketable securities are investments that can be readily converted into cash and traded on public exchanges. Cash equivalents, meanwhile, are things that can easily be converted into cash, like short-term savings bonds, short-term investments, and foreign currency. Cash and cash equivalentsĬash is simple: It’s how much money you have in the bank. Here are the seven main types of current assets, listed in order of liquidity (which is how they should be listed on a balance sheet). While cash is the most obvious current asset, it’s not the only one. Since balance sheets are organized in order of liquidity and current assets are the most liquid assets, they’re listed first under assets. There are three categories on a balance sheet: assets, liabilities, and equity. Understanding the different types of assets is essential because it determines how they get listed on a balance sheet (a financial document that gives a snapshot of a business's financial health at a given time). Non-current assets, on the other hand, are long-term assets that cannot be readily converted into cash within one year. What is a current asset?Ī current asset-sometimes called a liquid asset-is a short-term asset that a company expects to use up, convert into cash, or sell within one fiscal year or operating cycle. Even when your business is on track to succeed in the long-term, current assets can be helpful if you need extra money to cover short-term expenses. Your long-term assets, meanwhile, are that glass of ice-you can’t convert these assets to hard currency (i.e., water) as quickly. Think of current assets-also frequently (and aptly) referred to as liquid assets-as the glass of water your business can “drink” if it’s thirsty for cash. Of course, you gladly accept the water-even if you’re hot-because it’ll immediately quench your thirst. You’re very thirsty, and someone offers you either a glass of water or a glass of ice. ![]()
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