Current Assets are short-term operating assets. In the enterprise they are presented in two basic forms:
- In material form - inventory - finished products, goods, supplies and materials and semi-finished products
- In the form of money - money (in cash and in bank accounts), receivables (primarily from trade, i.e. unpaid invoices issued to customers, resp. other receivables - to employees or other persons) and short-term financial assets (short-term securities)
Current assets are constantly in motion, one form goes to another (money - purchased material - WIP (work in progress) - finished products - receivables - money). Turnover of current assets is very fast (in the store a few days, in the manufacture days to weeks). The faster the current assets under the same conditions reverse, the more profit they bring. Therefore, turnover ratios are important indicators of current assets utilization.
Current assets are used to pay liabilities especially with money. If the enterprise does not have money, it must use other current assets.
The effectiveness of the enterprise’s assets can be monitored using activity ratios.
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