Current Asset
What does it mean
Current Assets are a section of a borrower’s balance sheet. Assets is a listing of all of the stuff owned by a business, and this listing is broken into two sections, Current Assets and Noncurrent Assets. Current Assets contain all of the assets that will convert to cash during the normal course of business in the next 12 months. Some examples of Current Assets would include Inventory and Accounts Receivable. The reason that these types of assets would be included in an businesses Current Assets is because these items would typically be sold and the cash collected in the normal course of business.
Why does it matter
The reason why Current Assets matter is because the primary reason a business goes out of business is not due to profitability (take a look at all of the unprofitable tech companies on the stock exchange :), but because they run out of cash. Once the business runs out of cash, the game is over. Dollars tied up in Current Assets are the reserves that will most quickly be available to replenish cash.
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