In the working capital calculation, which items are typically considered current assets?

In the working capital calculation, which items are typically considered current assets?

• A. Overdrafts and payables.
• B. Inventory and receivables.
• C. Plant and machinery.
• D. Long-term investments.

Answer: (B)

Current assets are resources a business expects to convert into cash or use up within a year or its operating cycle. In working capital, you look at what can be turned into cash quickly to cover short-term obligations. Inventory and receivables fit this category because they are expected to be sold or collected within a year. Overdrafts and payables are liabilities, not assets. Plant and machinery are long-term (fixed) assets, and long-term investments are non-current assets. So the items typically considered current assets are inventory and receivables.

Current assets are resources a business expects to convert into cash or use up within a year or its operating cycle. In working capital, you look at what can be turned into cash quickly to cover short-term obligations. Inventory and receivables fit this category because they are expected to be sold or collected within a year. Overdrafts and payables are liabilities, not assets. Plant and machinery are long-term (fixed) assets, and long-term investments are non-current assets. So the items typically considered current assets are inventory and receivables.