Current assets

Within the financial world that operates in the current globalized economic system, one of the most essential terms for investors and entrepreneurs of all kinds is current assets, which is also known as current assets. Simply, current assets consist of the liquid assets that a company has at the closing date of a fiscal year, through resources such as: cash, banks and multiple types of short-term financial assets. Likewise, assets convertible into money within the following twelve months are also included, in other words, they can be converted into cash within a year, through clients, what is in stock or also works in progress. such as accounts receivable, short-term financial investments, or trade debtors.

Finally and in simple terms, current assets It can be defined as the liquid assets and rights of a company or business, in other words, the money that a company can have almost immediately.

Current assets within the general accounting plan of Spain

Once we have a first approach to the essential definition of current assets or current assets, we need to address how this instrument is applied or interpreted within the General Accounting Plan of Spain, since this entity includes the current assets of all assets that They are linked. to a normal operating cycle, which the company plans to carry out over the course of that period. In general, it is defined that a normal operating cycle should not exceed one year, and when from the perspective of each company it is not clear how long a normal operating cycle is, then it will be assumed that this is a year to avoid all. confusion or ambiguity about it.

Composition of current assets according to the General Accounting Plan of Spain

Based on the different definitions used by the General Accounting Plan, current assets are made up of the following items:

• The goods of a normal cycle of exploitation destined for their consumption, sale or realization.
• Assets of which we are waiting for their sale or realization in the short term.
• The immediate liquidity of a company, in other words, all the money, as well as the liquid assets that can be available at any time.

Current asset accounts classified as non-current

• As established in the General Accounting Plan, current assets are integrated into the following types of accounts:
• Non-current assets held for sale
• Accounts of clients and debtors.
• Stock accounts.
• Bank and savings accounts.
• Investments in group companies and that are related in the short term
• Short-term financial investments
• Cash and other equivalent liquid assets
• Biological assets

The use of working capital in current assets.

Working capital is one of the most important financial products that can be used to manage current assets well. Working capital can be understood as the difference between current assets and current liabilities. It is simply that part of current assets that is financed through non-current liabilities. In other words, it consists of liquid assets that are financed with long-term resources. Consequently, it can be said that working capital is constituted by the surplus that results from the current assets of a company, which can be calculated from two different formulas:

Working capital = Current assets-Current liabilities

Working capital = (Equity + Non-current liabilities) - Non-current assets

Several examples that we can find of current assets

• Stock or stock.
• Those that are in treasury and cash.
• Debts receivable in a period of less than twelve months.
• Financial investments that are amortized in a period of less than twelve months.

Stocks

The examples that we can find of current assets present in stocks are many and very many. Simply, here we can find all the tangible assets of the current assets, such as: products or merchandise that are pending sale, which, decidedly, can be of great variety, depending on the type of company. Likewise, we can also find in this area, the components of the different production processes of a company, such as: raw materials, containers, production machines, and finished or semi-finished products. Of course, this characteristic is more in line with large companies that not only sell the goods, but also produce them. Preferably, stocks can be divided for management and administration as follows:

• Commercial activities: It is exclusively all the merchandise that is acquired from other suppliers with the purpose of reselling it directly later, so it does not need any additional transformation procedure.
• Raw Materials: Raw materials correspond to all the products, purchases or resources available to the company to carry out an industrial transformation procedure in which it generates its own final products.
• Other supplies: This category is made up of goods and products that the company uses to maintain its operability, among which are the following items: multiple materials, fuels, materials manufactured by a third party to be used in subsequent transformation processes, spare parts, containers, office , packaging, etc.
• Products in process: It consists of goods that are in the transformation procedure at the balance sheet date, but that are not semi-finished products or waste.
• Semi-finished products: As its name suggests, it consists of all those products manufactured by the company, but that have not yet completed their corresponding production procedure, so they cannot be sold until they have completed their production procedure.
• Finished products: All are products that have finished their production process and are ready for sale.
• By-products, waste and recovered materials: They are those to which a certain sale value can be attributed, so they are also usually accounted for even when they already have a reduced sale value.

Treasury and cash

The treasury is made up of all the liquid money that is at our disposal, in other words, it is the cash that we can use immediately, which can be obtained through various instances, such as the following:

• Box
• Banks and various credit organizations.
• Short-term highly liquid investments.