What Is A Current Asset?

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Every businessperson or entrepreneur started his or her enterprise with certain foundations in place. Nobody ever created a business from scratch. Everyone started with something such as capital (loan or savings), creative idea, skillset, and motivation, no matter how small. These things are what we call business assets.

Generally, assets are anything that a person “owns”. May it be physical or intangible, fixed or current, and operating or non-operating. Whatever it may be, as long as you bought it or have your name in it, your property can be a current asset. 

However, in business, holdings are any valuable resources that a company owns due to its transactions and operations. It generates a company’s income and has an economic value that is beneficial for its future. Also, it sustains an organization’s growth, production, and operation. It also dictates the survivability and relevance of your company in the coming years. 

Business assets can either be current or non-current. Non-current or fixed holdings are the tangible, long-term resources used to sustain the company’s operations and production. At the same time, current ones are those that can be liquidated into cash within a year. Head on below for a further discussion on what an existing asset is.

What Is A Current Asset?

Like fixed ones, current assets are also tangible. However, they are short-term in nature and can easily be sold, used, consumed, and converted into cash within one fiscal year of a business’ operation. They facilitate and fund an establishment’s daily operations and expenses. Some examples of current holdings are:

  • Cash and its equivalents such as commercial paper, short-term government bonds, treasury bills, and bank accounts.
  • Marketable securities such as treasury bills, common stock, and money market instruments.
  • Inventory – represents the current goods, raw materials, and finished products a company possesses
  • Accounts receivable – any amount of money owed by a consumer. This happens when a company allows the purchase of their goods and services through credit.
  • Prepaid expenses – any amount of money that was used as an advanced payment for goods and services.

Current assets are listed on a company’s balance sheet and other financial statements. Together with other holdings, liabilities, and equity, they are used to derive financial data, get the overall net worth, and analyze a company’s performance. Owners, investors, creditors, and market analysts use annual data reports to picture the company’s future direction. Also, it helps in evaluating an enterprise’s financial situation and earning potential. 

A company’s total current assets indicate how it allocates and spends its day-to-day fund on business operations and productions. This allows the management to make the necessary preparations to ensure the continuity of their organization

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How To Protect Your Current Asset?

Asset protection plays a vital role in business operations. However, start-up enterprises are unaware of the pitfalls and risks of an unprotected enterprise. Property management and protection secure your company from threats such as liabilities, debt obligations, creditors, and damages claims. 

There are already strategies and laws in place to protect an enterprise’s assets. The only thing you need to do is to execute them properly and thoroughly, based on the needs of your company and the kinds of holdings you own. Also, it partly depends on the type of creditors that has a high probability of raising claims against you. 

  • Business Entities – setting up a business entity separates your personal holdings from your business one. This protects your organization from possible lawsuits and disputes that may arise. Choose the right kind of entity for your company, such as corporations, proprietorships, limited liability companies (LLC), and partnerships.
  • Set Up Proper Contracts – secure your holdings and all your establishment’s operations through proper lease agreements, titles, tax, and contract agreements on every project. Refrain from using emails for important business transactions. Contracts serve as your receipts for any internal and external problems you might encounter.
  • Business Insurance – setting up business insurance is also a good asset protection strategy. This way, you can protect your properties from natural disasters and accidents such as fire and storm surges. 
  • Physical Protection – aside from papers, you can also set up physical security measures to protect your physical holdings. This includes simple strategies such as tracking and recording every asset movement. You can also conduct inventory checks, place restrictions of access, and increase security measures. 

Suppose you are seeking more of this content and how you can repurpose your business or more business planning to snugly fit into the present world situation. In that case, Annette & Co. is here to offer you a FREE consultationAnnette Ferguson – Chartered Accountant and Certified Profit First Professional – can help you unlock financial strategies to improve the profitability of your business amidst an economic crisis. You can also follow us on Instagram.

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Annette Ferguson

Annette Ferguson

Owner of Annette & Co. - Chartered Accountants & Certifed Profit First Professionals. Helping Online service-based entrepreneurs find clarity in their numbers, increase wealth and have more money in their pockets.