Short-term asset

Definition

Short-term assets are resources that a company expects to convert to cash or use up within one year or one operating cycle, whichever is longer. These assets play a crucial role in maintaining the liquidity of the business.

5 Must Know Facts For Your Next Test

1. Short-term assets typically include cash, accounts receivable, inventory, and marketable securities.
2. They are listed on the balance sheet under current assets.
3. Short-term assets are critical for a company's day-to-day operations and financial health.
4. Proper management of short-term assets ensures that a business can meet its short-term obligations.
5. The turnover ratio of short-term assets can indicate how efficiently a company is using its resources.

Related terms

Current Liabilities:

Obligations that a company needs to pay within one year or one operating cycle.

Working Capital:

The difference between current assets and current liabilities indicating the liquidity position of a company.

Liquidity Ratio: Financial metrics used to determine a company's ability to pay off its short-term debts with its short-term assets.