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Current and Noncurrent

In: Business and Management

Submitted By beth124
Words 693
Pages 3
Expensive, well-executed, and familiar ads convince the investors, as nothing in the black and white tables of assets and debits can, that the company is important and prosperous” (Schudson). Current and Noncurrent assets is important to have for any business. In this paper the subject is to discuss both of these and what the differences are between those. Also to understand the order of liquidity and the order of liquidity apply to the balance sheet.

What are current assets? Current assets are the value of certain assets that can be converted into cash within a year or less. Current assets are important for any business to have because it provides the company the funds to operate day-to-day. Some of the current assets which a business may have on hand that can be easily converted into cash are inventory, accounts receivable, and cash itself. One way to look at it is that an owner of a restaurant recently received a shipment in of fruits and vegetables they can turn this into cash by serving many dishes with the fresh fruit and vegetables in it. Noncurrent assets are one that could not be turned in cash in a span 12 months or longer. This is also a necessity for any business to have. What noncurrent assets entails is equipment purchased for the business to operate, the plant or store itself. This is something that a company cannot sell right away but one could sell down the road to provide the business with upgrades. It may also provide enough cash to move into a bigger facility. A noncurrent asset like machinery and equipment is known to depreciate over time so it would be hard for a company to earn a profit if they go and sell it. Noncurrent assets could also provide collateral against a loan if the company is in need of cash. With both current and noncurrent assets it is important for a company to have both of these. The business needs...

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