If you are not new with bank transactions like, then you should have probably come across current assets. This can be in cash, receivables, short-term investments, inventory or even portions of prepaid liabilities that are expected to be paid within a year.
This can usually be seen in a bank statement and can be converted to cash or used to pay liabilities within a year’s time. A good example of this is depositing check balance to your account.
While the check is in clearing, you will be able to see it in your current balance, but you cannot withdraw it until it is already cleared and moved to your balance assets.
The Use of Current Assets in the Stock Market
The stock market is a virtual market place. It puts every company out in the market for stock buyers and sellers to invest on.
Alongside these companies are its assets and liabilities, which the investors will find useful in their stock analysis.
Usually, a learned investor with the advice of his or her agent will go for companies with high positive financial flow chart. This means that the company has healthy financial grade which is usually based on its liquidity or ability to meet its short-term obligations.
This can be calculated through the liabilities of the company divided by its current assets. This is basically the use of current assets in the stock market and analysis.
Factors Affecting Current Assets
There are many things that could affect current assets of a particular company like time and liabilities of the company.
Normally, current assets are applicable in a year’s time therefore, it has to be converted into cash or any other form of financial asset before it is forfeited. If it won’t be converted within this time frame, there is no way these current assets will be useful.
The liabilities of a company also affect its current assets. All current assets of a company are usually divided to the liabilities of that company thereby getting the liquidity of the company.
Only when a company has a positive cash flow can it be a viable investment for stock investors. It is then safe to say that all companies without high current assets are not good to invest in.
Current Assets are Important in the Stock Market
Everything that amounts to a company, negative or positive, is necessary to the stock market. These values are highly necessary in stock analysis and thus, important to investors in the market.
Knowing that a company has high current assets is going to change its marketability, growth, and all other capabilities.
Finally, current assets are not just important in stock market, but even in every person’s life. Current assets are applicable even when making a budget for the family.
It will always be good to know that there are assets like receivables and credits where the payment for bills and everything else can be deducted from. Just make sure that these current assets can be realized before the bills’ due though.