Definition of Current Asset in English

The current assets or current assets is the liquid asset at the time of closing of an exercise or is convertible to cash a period of less than twelve months. This type of asset is in continuous operation and can be sold, transformed, used, converted into cash or delivered as payment in any normal operation.

The cash cash and banks, marketable securities, accounts receivable, raw materials and goods in process are some of the components of the active current. The concept, therefore, encompasses the treasury (savings banks and current accounts), convertible or consumable assets in the short term and quasi-liquid assets.

Current assets are assets and rights of a company that are characterized by their liquidity. This means that companies dispose of these assets in liquid form at the moment or that they can do so within the normal production cycle. The more liquid assets, the greater liquidity.

The non – current assets, however, are those which correspond to the assets and rights that can not be converted into cash within one year and remain with the company for more than one year.

The fixed assets, finally, do not vary during the year tax or operating cycle of the company. An example of a fixed asset is a factory building, which is part of the company throughout the production process. Unlike current assets, fixed assets are poorly liquid.

Invest in currency

In order to know how much money it is necessary to invest in current assets, first of all you must evaluate all the needs of a company in its fixed assets, that is, in the total of material or intangible assets that are included in the balance sheets and that have been created or acquired for long-term use. Once this point is reached, it is possible to face the expenses to use these resources.

The objective is to recover said investment, and for this it is necessary to carry out the sale of the products, so that a continuous flow is generated, which begins with production; on the other hand, the fixed assets necessary for financing deteriorates and must be replaced. In short, the amount of current assets required must be determined so that the continuity of the cycle just exposed is possible.

The process easier and straightforward to perform this calculation is the determination of the following parameters:

* average maturity period of the company: this is the time it takes for a given unit of money (which can be a dollar, a euro, a peso, etc.) to be used for the initial investment to return to the treasury of a company through the collection of sales;

* average daily expense: it is the annual evaluation of the purchases of provisions necessary for the operation of the company, of raw materials, of labor and of any general expense, expressed in an average per day.

Once these data are obtained, it is known that by making your product the minimum amount necessary to finance current assets is obtained. It is a value that must be invested permanently, either with own money or through third-party financing. It should be noted that if any of these parameters is modified, and the pertinent review of their impact is not carried out, the life of a company is endangered.

Responsible management is the foundation of a company’s success, and this brings consistency and close attention to movement, since a small oversight can quickly turn into an avalanche.

Current Asset