Assets are resources that a company uses in its business operations. Current assets are those that it expects to use up or convert to cash within one business cycle or one year. Current assets differ from long-term — or noncurrent — assets, which a company expects to still have after a year. Current assets are reported in the assets section of the company's balance sheet. A greater total of current assets means a company has higher liquidity and greater ability to pay short-term bills.
Find a company’s balance sheet in its quarterly report on Form 10-Q or its annual report on Form 10-K. You may download these reports from the investor relations section of a company’s website or from the U.S. Securities and Exchange Commission’s online EDGAR database.
Identify the amounts of each individual current asset, which are listed in the assets section of the balance sheet. Current assets include cash and cash equivalents, short-term investments, inventory, accounts receivable and prepaid expenses, such as prepaid insurance. For example, assume a company has $100,000 in cash and cash equivalents, $20,000 in short-term investments, $50,000 in inventory and $30,000 in accounts receivable.
Add together the amount of each individual current asset to determine the amount of total current assets. In this example, add $100,000, $20,000, $50,000 and $30,000 to get $200,000 in total current assets.
Calculate a company’s total current assets each accounting period to determine any changes. With all else being equal, an increase in total current assets results in an increase in a company’s short-term financial health.
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