Current assets are the cash and other assets that a business can easily convert to cash within one year.
Primary Implication
Current assets are essential—you can’t run a business without them. If your Current Assets are primarily tied up in Accounts Receivable, then it’s about how confident you are that you will collect the monies owed you. If you are confident, you will collect the money when it’s due because you have an accounts receivable collections process in place, then this is an acceptable business dynamic unless your current liabilities exceed your current assets.
If you are concerned about collecting the monies owed, you need to implement an accounts receivable collections process to ensure you get paid. The failure to get paid money that is outstanding results in zero cash inflow until the past-due invoices get paid.
Overview
Current assets are the resources you have available to run your businesses on a short-term basis. These assets are continually flowing in and out of your business through the ordinary course of business operations, for example, cash that is converted first into goods and then back into cash.
Current assets are used to fund day-to-day operations and pay ongoing expenses. On the Balance Sheet, current assets are generally displayed in order of liquidity, that is, the ease with which they can be turned into cash in less than one year. These assets include petty cash, checking, savings, prepaid expenses, accounts receivable, marketable securities, and inventory from raw materials, WIP, to finished goods.
