Current assets are cash or other assets that are reasonably expected to be converted into cash, sold, or consumed within one year or a normal operating cycle.An operating cycle is defined as the company's ability to

A) spend cash to payoff the company's liabilities
B) spend cash to acquire inventory, which is sold and returned to cash
C) spend cash to acquire inventory, which is sold to customers in the normal course of business
D) spend cash in the generation of services, which can result in an increase in revenue and net income from operations

Question

Johnny Caves · Accepted Answer

Final Answer : B, Explanation :  An operating cycle is defined as the company's ability to spend cash to acquire inventory, which is sold and returned to cash. This means that inventory is purchased, sold to customers, and then the cash is returned to the company. This cycle is typically completed within one year, which is why current assets are those that are expected to be converted into cash within one year or one operating cycle.

Definitions

Learning Objectives

Learning Objectives

Related questions