Which term best matches 'This type of asset can be converted to cash within one year'?

Which term best matches 'This type of asset can be converted to cash within one year'?

• A. Current assets
• B. Intangible assets
• C. Long-term assets
• D. Assets

Answer: (A)

The concept here is liquidity—how quickly an asset can be turned into cash. Assets that you expect to convert to cash within one year are called current assets. This short time horizon is what sets them apart from other assets, which are held longer and aren’t expected to become cash in the near term. Current assets include items like cash itself, accounts receivable, and inventory—things that a business can typically convert to cash within the next 12 months or the operating cycle. Long-term assets, by contrast, are items like property, plant, and equipment or long-term investments, which are not expected to be sold or converted into cash within one year. Intangible assets are a category of assets that are non-physical (like goodwill or patents); their liquidity isn’t defined by the one-year rule and can vary, but they aren’t described by the quick conversion trait the statement specifies. The broad term “assets” doesn’t convey this timing aspect, so the best match for converting to cash within one year is current assets.

The concept here is liquidity—how quickly an asset can be turned into cash. Assets that you expect to convert to cash within one year are called current assets. This short time horizon is what sets them apart from other assets, which are held longer and aren’t expected to become cash in the near term.

Current assets include items like cash itself, accounts receivable, and inventory—things that a business can typically convert to cash within the next 12 months or the operating cycle. Long-term assets, by contrast, are items like property, plant, and equipment or long-term investments, which are not expected to be sold or converted into cash within one year. Intangible assets are a category of assets that are non-physical (like goodwill or patents); their liquidity isn’t defined by the one-year rule and can vary, but they aren’t described by the quick conversion trait the statement specifies. The broad term “assets” doesn’t convey this timing aspect, so the best match for converting to cash within one year is current assets.