Definition of Current Assets, Current Liabilities, Current Ratio

Current Assets :

A balance sheet account that represents the value of all assets that can reasonably expected to be converted into cash within one year. Current assets include cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses and other liquid assets that can be readily converted to cash.

Current Liabilities :

A company’s debts or obligations that are due within one year. Current liabilities appear on the company’s balance sheet and include short term debt, accounts payable, accrued liabilities and other debts.

Current Ratio :

One application is in the current ratio, defined as the firm’s current assets divided by its current liabilities. A ratio higher than one means that current assets, if they can all be converted to cash, are more than sufficient to pay off current obligations. All other things equal, higher values of this ratio imply that a firm is more easily able to meet its obligations in the coming year.

In Bangladesh the issue of current liabilities are often seen as overlapping among different types of liabilities.

The standard C.A. /C.L ratio is 2:1