Current Assets

Current assets are resources a company expects to convert to cash, sell, or consume within one year. They appear at the top of the assets section on the balance sheet and indicate short-term liquidity—how readily a company can meet near-term obligations.

Why current assets matter

• Show a company’s ability to pay short-term liabilities and fund operations.
• Are used by management, creditors, and investors to assess liquidity and working capital needs.
• Feed into common liquidity ratios (current ratio, quick ratio, cash ratio) that compare current assets to current liabilities.

Common types of current assets

Listed roughly in order of liquidity:

• Cash and cash equivalents
• Includes on-hand cash, demand deposits, money market funds, treasury bills, and short-term CDs that have no restrictions on liquidity.
• Marketable securities
• Liquid investments traded on public markets that can be sold quickly without materially affecting price.
• Accounts receivable
• Amounts owed by customers for goods or services delivered. Net of an allowance for doubtful accounts to reflect likely uncollectible receivables.
• Inventory
• Raw materials, work in progress, and finished goods. Liquidity varies by product and industry.
• Prepaid expenses
• Payments made in advance for goods or services (e.g., insurance). Not convertible to cash but free up future cash flows.
• Other short-term investments
• Short-duration instruments or excess cash invested temporarily.

Current vs. noncurrent assets

• Current assets: convertible to cash or consumed within one year.
• Noncurrent (long-term) assets: held longer than one year (property, plant, equipment, long-term investments). Noncurrent assets are generally recorded at cost and depreciated or amortized; current assets are carried at fair value or net realizable value.

How to calculate total current assets

Total current assets is the sum of all qualifying short-term asset accounts shown on the balance sheet:

Current Assets = Cash + Cash Equivalents + Marketable Securities + Accounts Receivable (net) + Inventory + Prepaid Expenses + Other Short‑term Assets

Most balance sheets present a subtotal called “Total Current Assets.”

Real-world examples

• Walmart (FY2024) — Total current assets: $76.9 billion
• Cash & short-term investments: $9.9B
• Accounts receivable: $9.0B
• Inventory: $54.9B
• Other current assets: $3.3B
• Microsoft (FY2023) — Total current assets: $184.3 billion
• Cash & short-term investments: $111.3B
• Accounts receivable: $48.7B
• Inventory: $2.5B
• Other current assets: $21.8B

Key liquidity ratios using current assets

• Current ratio = Total Current Assets / Current Liabilities
• Measures ability to cover short-term obligations with all current assets. A higher ratio indicates more cushion; too high may indicate idle assets.
• Quick ratio (acid-test) = (Cash + Cash Equivalents + Marketable Securities + Accounts Receivable) / Current Liabilities
• Excludes inventory; focuses on the most liquid assets.
• Cash ratio = Cash and Cash Equivalents / Current Liabilities
• Most conservative; shows ability to pay current liabilities immediately with cash on hand.

Practical considerations

• Order of presentation reflects liquidity, but classifications can vary by company and industry.
• Inventory and certain receivables may be less liquid than they appear—industry context matters.
• Management decisions (e.g., investment of excess cash in short-term securities) and accounting policies (e.g., valuation of inventory, allowance for doubtful accounts) affect reported current assets.

Bottom line

Current assets summarize the short-term resources a company can use to operate and meet obligations within a year. Reviewing their composition and related liquidity ratios helps stakeholders judge a company’s short-term financial health and operational flexibility.