Current Assets

Current assets fund day-to-day operations, and their composition matters far more than their total: cash is worth its face value, receivables are worth what will actually be collected, and inventory is worth what it will actually sell for. A rising current asset total driven by ageing receivables and slow inventory is a deterioration dressed as growth. The classification depends on the operating cycle, so a construction company can legitimately classify as current an asset that will take three years to realise. This is why the quick ratio, which excludes inventory, often tells a truer liquidity story than the current ratio.