Current assets or total current assets refer to the total value of a company's short-term assets that are expected to be converted into cash within one year or a normal operating cycle. Current assets are reported on a company's balance sheet as a separate category from long-term assets and other non-current assets.
Examples of current assets may include cash and cash equivalents, accounts receivable, inventory, and prepaid expenses. These are typically assets that a company has on hand as a result of its ongoing operations, such as money it is owed by customers or inventory it plans to sell in the near future.
Investors and analysts often use Total Current Assets as a metric to evaluate a company's liquidity and ability to meet its short-term financial obligations. A company's current ratio, which is the ratio of its current assets to its current liabilities, is often used as a measure of its ability to pay off its short-term debt obligations.
Let's consider a company that has the following current assets on its balance sheet:
To calculate the company's Total Current Assets, you would add up all of the current asset balances: Total Current Assets = $50,000 + $100,000 + $75,000 + $10,000 = $235,000
Therefore, in this example, the company's Total Current Assets are $235,000, which represents the total value of its short-term assets that are expected to be converted into cash within one year or a normal operating cycle.