Current assets are the assets of enterprises, which are reflected in the balance sheet in the asset. Current assets is a concept that characterizes the aggregate of material assets of an enterprise that serves production and commercial activities and is wholly consumed in one production and economic cycle. Working capital is classified according to several criteria.
Current assets include production assets, assets in circulation and others. Production circulating assets are raw materials, consumables, semi-finished products, spare parts, containers and more. These also include deferred expenses and work in progress. Assets in circulation are funds that have already been invested in finished, but not yet shipped products, accounts receivable, as well as available funds in accounts and on hand. Other current assets are the value of damaged, missing, but not yet written off goods and materials, excise taxes, which are subsequently deductible, and more.
According to the period of operation, a constant and variable share of current assets is distinguished. The permanent part is a share that does not depend on seasonal and various other jumps in the production activities of the company and is not associated with the creation of inventories of seasonal storage materials. This is the minimum minimum that the enterprise needs for uninterrupted operation. A variable share is a part of assets that varies depending on seasonal fluctuations in the volume of production and sales of products, as well as on the need to create seasonal inventory of inventories.
The level of liquidity allocate:
- Current assets that are completely liquid. These include assets that do not need to be sold and constitute a ready-made means of payment - money.
- Highly liquid current assets that can be easily and very quickly (up to one month) converted into money without serious losses from market value. As a rule, these are short-term investments, receivables and more.
- Medium-liquid assets that can be converted into money within six months without tangible losses. These include finished products and ordinary receivables.
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Weakly liquid current assets that can be converted into money without cost losses after a long period of time (more than six months). This is work in progress, semi-finished products and raw materials.
- Illiquid current assets - this is something that can not be converted into money on their own. They are subject to sale only as part of the entire complex of property. These are deferred expenses, as well as bad receivables and more.
According to the nature of the origin of financial sources, gross and net assets are distinguished. Gross characterize the entire volume of assets generated by borrowed and equity. Net assets are formed by borrowed long-term and equity capital. They represent the difference between the sum of current assets and short-term liabilities.
