What are current assets in financial terms?

Current assets refer to the resources owned by a company that are expected to be converted into cash or consumed within one year or within a normal operating cycle. The definition aligns with the concept of liquidity in finance, which assesses how quickly and efficiently assets can be converted to cash.

Cash itself is a current asset because it is readily available for use in business operations. Additionally, items such as inventory and accounts receivable are classified as current assets because they can be sold or converted to cash in the short term. The emphasis is on the ease of conversion and the time frame, which is within one year.

The other options do not fit the definition of current assets. Long-term investments and property are categorized as non-current or long-term assets, as they are not intended to be converted to cash quickly. Liabilities are obligations the company owes, which is an entirely different classification than current assets. Furthermore, including all company debts and obligations also does not represent a current asset; instead, it pertains to liabilities, which are essential for financial analysis but are in contrast to what constitutes current assets.