A short-term asset that can be converted to cash quickly.

A short-term asset that can be converted to cash quickly.

• A. Current Assets
• B. Net Current Assets/Working Capital
• C. Long-Term Liabilities
• D. Capital

Answer: (A)

Assets are classified by how quickly they can be turned into cash. A short-term asset that can be converted to cash quickly is a current asset. This covers items the business expects to use or convert within a year, like cash, money customers owe (receivables), and stock ready for sale. These give a clear picture of liquidity—the ability to meet short-term obligations. Net current assets, or working capital, isn’t an asset itself; it’s the difference between current assets and current liabilities and shows overall liquidity. Long-term liabilities are debts due after more than a year, not assets. Capital refers to funds invested in the business, not something that can be quickly converted into cash.

Assets are classified by how quickly they can be turned into cash. A short-term asset that can be converted to cash quickly is a current asset. This covers items the business expects to use or convert within a year, like cash, money customers owe (receivables), and stock ready for sale. These give a clear picture of liquidity—the ability to meet short-term obligations.

Net current assets, or working capital, isn’t an asset itself; it’s the difference between current assets and current liabilities and shows overall liquidity. Long-term liabilities are debts due after more than a year, not assets. Capital refers to funds invested in the business, not something that can be quickly converted into cash.