Explanation of Total Current Assets:
Also called Current Assets and listed on the Balance Sheet, the Total
Current Assets represent the cash or assets that are expected to be converted
into cash - also called near-cash assets. These are assets that
are typically consumed and replaced during normal business activities
of the company. Usually, assets to be converted are expected to do so
within one year, or one cycle of operations (whichever is the longer of the
two). The cycle of operations is the total time required to create, sell,
and collect cash on the products a company might produce. Total Current
Assets usually make up several line items, such as Cash, Marketable Securities,
Accounts Receivable, Inventories, and Prepaid Expenses.
Importance of Total Current Assets:
Total Current Assets as a whole are important, but each of the line items
that make up the Total Current Assets are also important. Some
performance ratios that require the Total Current Assets are the Current
Ratio and Quick Ratio.
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