Which term describes assets that can be converted to cash within one year?

Which term describes assets that can be converted to cash within one year?

• A. Current assets
• B. Non-current assets
• C. Liabilities
• D. Share capital

Answer: (A)

Liquidity is about how quickly assets can be turned into cash. On the balance sheet, assets are grouped by how soon they can be converted within one year. The term for assets that can be converted to cash in that short time frame is current assets. These cover cash and cash equivalents, accounts receivable, inventory, marketable securities, and other short-term resources. They are contrasted with non-current assets, which are long-term and not expected to be converted within a year (like property, plant, equipment, and intangible assets). Liabilities are what the company owes, and share capital represents equity contributed by owners. So, the asset group that fits the one-year conversion criterion is current assets.

Liquidity is about how quickly assets can be turned into cash. On the balance sheet, assets are grouped by how soon they can be converted within one year. The term for assets that can be converted to cash in that short time frame is current assets. These cover cash and cash equivalents, accounts receivable, inventory, marketable securities, and other short-term resources. They are contrasted with non-current assets, which are long-term and not expected to be converted within a year (like property, plant, equipment, and intangible assets). Liabilities are what the company owes, and share capital represents equity contributed by owners. So, the asset group that fits the one-year conversion criterion is current assets.