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Financial Terms | |
Current asset |
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Definition of Current assetCurrent assetTypically the cash, accounts receivable, and inventory accounts on the
Related Terms:Current assetsValue of cash, accounts receivable, inventories, marketable securities and other assets that Current assetsCash, things that will be converted into cash within a year (such as accounts receivable), and inventory. Current assetsAmounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments. current assetscurrent refers to cash and those assets that will be turned Current AssetsCash and other company assets that can be readily turned into cash within one year. Other current assetsValue of non-cash assets, including prepaid expenses and accounts receivable, due Accounts receivableA current asset on the balance sheet, representing short-term ![]() Acid-test ratioAlso called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid ACID-TEST RATIOA ratio that shows how well a company could pay its current debts using only its most liquid or “quick” assets. It’s a more pessimistic—but also realistic—measure of safety than the current ratio, because it ignores sluggish, hard-toliquidate current assets like inventory and notes receivable. Here’s the formula: Carring costsCosts that increase with increases in the level of investment in current assets. carrying costsCosts of maintaining current assets, including opportunity cost of capital. Current maturitycurrent time to maturity on an outstanding debt instrument. Current ratioIndicator of short-term debt paying ability. Determined by dividing current assets by current Current ratioA ratio that shows how many times a company could pay its current debts if it used its current assets to pay them. The formula: current ratioCalculated to assess the short-term solvency, or debt-paying Current RatioA measure of the ability of a company to use its current assets to ![]() Current Ratiocurrent assets divided by current liabilities. This ratio indicates the extent to which the claims of short-term creditors are covered by assets expected to be converted to cash in the near future. Indirect methodA method of preparing the operating section of the Statement of Cash Flows that does not use the company’s actual cash inflows and cash outflows, but instead arrives at the net cash flow by taking net income and adjusting it for noncash expenses and the changes from last year in the current assets and current liabilities. Margin callA demand for additional funds because of adverse price movement. Maintenance margin Marketable securityAn easily traded investment, such as treasury bills, which is Net working capitalcurrent assets minus current liabilities. Often simply referred to as working capital. net working capitalcurrent assets minus current liabilities. NOTES RECEIVABLENotes receivable are promissory notes that the company has accepted from its debtors. Most promissory notes pay interest. Those that are due within a year are shown under “current assets.” Those that mature in more than a year would be listed under “Long-term assets.” If a note is being Quick assetAny asset that can be converted into cash on short notice. This is a subset Quick assetscurrent assets minus inventories. Quick ratioIndicator of a company's financial strength (or weakness). Calculated by taking current assets Quick RatioA measure of how easily a company can use its most liquid current ![]() Self-liquidating loanLoan to finance current assets, The sale of the current assets provides the cash to repay Shortage costCosts that fall with increases in the level of investment in current assets. shortage costsCosts incurred from shortages in current assets. Working capitalDefined as the difference in current assets and current liabilities (excluding short-term Working capitalcurrent assets less current liabilities. Money that revolves in the business as part of the process of buying, making and selling goods and services, particularly in relation to debtors, creditors, inventory and bank. working capitaltotal current assets minus total current liabilities Working capitalThe amount of a company’s current assets minus its current liabilities; Working Capitalcurrent assets minus current liabilities Working CapitalFunds invested in a company's cash, accounts receivable and inventory. Net working capital is current assets minus current liabilities. Working capital managementThe management of current assets and current liabilities to maximize shortterm liquidity. Acquisition of assetsA merger or consolidation in which an acquirer purchases the selling firm's assets. AssetAny possession that has value in an exchange. AssetA resource, recorded through a transaction, that is expected to yield a benefit to a AssetSomething that is owned; a financial claim or a piece of property that is a store of value. AssetProbable future economic benefit that is obtained or controlled by an entity as a result of assetAnything owned by, or owed to, an individual or business which has commercial or exchange value (e.g., cash, property, etc.). AssetAll things of value owned by an individual or organization. Asset activity ratiosRatios that measure how effectively the firm is managing its assets. Asset allocation decisionThe decision regarding how an institution's funds should be distributed among the Asset-Backed SecuritiesBond or note secured by assets of company. Asset-backed securityA security that is collateralized by loans, leases, receivables, or installment contracts Asset-based financingMethods of financing in which lenders and equity investors look principally to the Asset-Based FinancingLoans granted usually by a financial institution where the asset being financed constitutes the sole security given to the lender. Asset classesCategories of assets, such as stocks, bonds, real estate and foreign securities. Asset CoverageExtent to which a company's net assets cover a particular debt obligation, class of preferred stock, or equity position. Asset-coverage testA bond indenture restriction that permits additional borrowing on if the ratio of assets to Asset/equity ratioThe ratio of total assets to stockholder equity. Asset for asset swapCreditors exchange the debt of one defaulting borrower for the debt of another Asset/liability managementAlso called surplus management, the task of managing funds of a financial asset mixThe weighting of assets in an investment portfolio among different asset classes (e.g. shares, bonds, property, cash, overseas investments. Asset pricing modelA model for determining the required rate of return on an asset. Asset pricing modelA model, such as the Capital asset Pricing Model (CAPM), that determines the required Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Asset substitutionA firm's investing in assets that are riskier than those that the debtholders expected. Asset substitution problemArises when the stockholders substitute riskier assets for the firm's existing Asset swapAn interest rate swap used to alter the cash flow characteristics of an institution's assets so as to Asset turnoverThe ratio of net sales to total assets. asset turnovera ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets asset turnover ratioA broad-gauge ratio computed by dividing annual AssetsA firm's productive resources. ASSETSAnything of value that a company owns. AssetsThings that the business owns. AssetsItems owned by the company or expenses that have been paid for but have not been used up. Assets requirementsA common element of a financial plan that describes projected capital spending and the capital assetan asset used to generate revenues or cost savings Capital assetA fixed asset, something that is expected to have long-term usage within Capital asset pricing model (CAPM)An economic theory that describes the relationship between risk and Capital Asset Pricing Model (CAPM)A model for estimating equilibrium rates of return and values of capital asset pricing model (CAPM)Theory of the relationship between risk and return which states that the expected risk Capitalized Cost An expenditure or accrual that is reported as an asset to be amortized againstfuture-period revenue. concurrent engineeringsee simultaneous engineering Contra-asset accountAn offset to an asset account that reduces the balance of the asset account. Current accountNet flow of goods, services, and unilateral transactions (gifts) between countries. Current AccountThat part of the balance of payments accounts that records demands for and supplies of a currency arising from activities that affect current income, namely imports, exports, investment income payments such as interest and dividends, and transfers such as gifts, pensions, and foreign aid. Current costUnder target costing concepts, this is the cost that would be applied to a Current couponA bond selling at or close to par, that is, a bond with a coupon close to the yields currently Current-coupon issuesRelated: Benchmark issues Current DollarsA variable like GDP is measured in current dollars if each year's value is measured in prices prevailing during that year. In contrast, when measured in real or constant dollars, each year's value is measured in a base year's prices. Current Income Tax ExpenseThat portion of the total income tax provision that is based on Current issueIn Treasury securities, the most recently auctioned issue. Trading is more active in current Current liabilitiesAmount owed for salaries, interest, accounts payable and other debts due within 1 year. Current liabilitiesBills a company must pay within the next twelve months. Current liabilitiesAmounts due and payable by the business within a period of 12 months, e.g. bank overdraft, creditors and accruals. current liabilitiescurrent means that these liabilities require payment in Current LiabilitiesDebts or other obligations coming due within a year. Current liabilityThis is typically the accounts payable, short-term notes payable, and Current rate methodUnder this currency translation method, all foreign currency balance-sheet and income Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. Current yieldFor bonds or notes, the coupon rate divided by the market price of the bond. current yieldAnnual coupon payments divided by bond price. Current YieldThe percentage return on a financial asset based on the current price of the asset, without reference to any expected change in the price of the asset. This contrasts with yield-to-maturity, for which the calculation includes expected price changes. See also yield. Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |