Every large company also works with current assets because they are simply part of the balance sheet. This fortune is not called permanent, because it should show new additions as well as withdrawals quickly. In the Commercial Code, under the definition of current assets, it is an asset that should not be permanently available to a company.
What are current assets?
A company must of course always have an up-to-date balance sheet. This includes assets and liabilities. Current assets include, among other things, inventories, receivables from unpaid deliveries, securities and also a credit balance with the bank.
A company has fixed assets as well as current assets; in contrast to current assets, the fixed assets are retained for a longer period of time. Fixed assets include property, plant and equipment such as company cars, office equipment, and appliances and machines.
Then there are the so-called financial assets, which are made up of securities and bonds. Patents and licenses are among the intangible assets.
Fixed assets of a company are:
- Office equipment
- Shares in other companies
- Long-term investments
- Existing land
The current assets, abbreviated as CA on abbreviationfinder, consist of a short-term investment which, as already mentioned, must contain additions and withdrawals.
A company’s current assets are:
- Outstanding claims against third parties
- All finished products
- Cash holdings
- raw materials
- Down payments that have been made
These current assets are also referred to as monetary current assets. The UV must always be listed separately in a company’s balance sheet, because it can decrease or increase significantly in a relatively short period of time.
Working capital and its importance
Current assets are also referred to as working capital because they are used in the purchase of materials and goods. This can be compared to a discounter, where goods are on a shelf that has not yet been sold. The discounter, on the other hand, has already paid for the inventory, but has not yet made a profit. Precisely for this reason, an inventory also plays a major role in a company or company. The UV is clearly divided into four different items. For example, there would be a company’s inventories, including auxiliary materials, raw materials and supplies. This item only includes products that are still being processed.
The auxiliary materials, on the other hand, are only intended for processing certain products. These materials include small parts such as screws, nails, adhesives, etc.
This is followed by the so-called operating materials, they belong to the category of materials without which production would not work. What is meant are oils and lubricants without which certain devices or machines would not run.
The operating materials also include products that have not yet been completed and materials that cannot yet be sold. Here, however, costs have already been incurred, because the products have already been paid for. These in turn are declared as manufacturing costs.
Finally, there are the finished products that are ready to be shipped. These have been manufactured by the respective company itself.
The operating current assets
The UV also includes claims that are made to third parties. These can be claims from existing contracts or claims against another company. The item other assets is a collective item, since the current assets cannot be assigned to any of the other items already mentioned. These can be loans, loans to employees or receivables that contain a guarantee.
The UV can be clearly defined, namely it represents all objects of value that are consumed, sold or used for processing.
Current or fixed assets
Every company must be able to indicate what exactly belongs to which assets. The only difference here is in consumption or use. Fixed assets are anything that can be found in a company over the long term. This also includes assets that are used by a company over a longer period of time.
In detail, as already mentioned, this includes all of the office equipment, devices and machines that are used to manufacture a product, but also the property acquired. When it comes to office equipment, it must be defined what exactly it is. Fixed assets include a printer, computer or a copier. These are all investments that are used over the long term.
Current assets, on the other hand, include valuables that are no longer used. Also, debt and trade credits be declared UV. The manufactured products themselves have a high current capacity, because they are manufactured with raw materials and also with operating and auxiliary materials, which are known to reduce consumption during production.
Anyone who divides into two subcategories can note the difference. On the one hand, there are fixed assets that remain in operation for a longer period of time. The current assets, on the other hand, are either used up, manufactured in-house and then sold again.
What is a working capital?
As the name suggests, a UV is always in motion. Things that are part of it only linger in a company for a short time. The person skilled in the art describes all consumer goods as current assets.
These are in detail liquid funds, receivables, stocks, securities and other items that belong to the assets. A company that manufactures something needs raw materials and supplies. This also includes the finished products, receivables from sales, as well as checks, for example.
Shares in other companies that exist are also part of the current assets. The working capital intensity can of course also be calculated. Here the
calculation says that the current assets intensity is the current assets plus the total assets.
Based on the intensity, you can quickly see how high a company’s current assets are.
Long-term working capital
Sounds strange at first, but there are. However, the term should be assigned to a static liquidity analysis. A key figure is then required for this, which is needed to calculate the degree of coverage. Items that are reordered immediately after use can be classified as long-term current assets so that they are always in stock. To do this, you can use intelligent warehouse management in the form of online warehouse software and you always have an overview of your stocks!
What is a current asset anyway?
The UV is there so that a repayment can take place as quickly as possible or other purchases can be made. As the name suggests, it only stays with a company for a short time.
A company can always show total assets in which current assets and fixed assets are added together. As a rule, the UV is issued quickly in order to buy new supplies, i.e. raw, operating and auxiliary materials. However, it can also be used to pay claims made by a third party to the company. This also includes all liquid funds in the form of bank balances, checks and the actual cash on hand.