Otowiing are impo

ortant managerial uses of ra io analysis.

Classification of Assets & Liabilities
Difrerence between assets
and liabilities: Assets
liabilites will give gives you future financial benefit, and on the other
of assets to liabilities should always be higher.nand,
you future obligation. The
a
ditference between assets and proportion 1ne
liabilities is equity/capital in the
and liabilities are
classified into different groups. Class. company. Depending upon the nature,
assets
This classification of assets and liabilities helps
arranging assets and liabilities in a proper manner in the Balance Sheet.
Current Assets

CurrentASsets represent the assets of a company that are expected to be conveniently sold, consumed, used or
exnausted through standard business operations within one year. However, if a company has an operating cycle
that is longer than one year, an asset that is expected to turn into cash within that longer operating cycle wit oe d
current asset.

Luirrent assets are usually presented first on the company's Balance Sheet and they are arranged in their order
of liquidity.

Current assets are also a key component of a company's working capital and the current ratio.

Examples of Current Assets and the typical order of liquidity include:

Cash and Cash Equivalents

Temporary Investments
Accounts Receivable
Inventoryy
Supplies
Prepaid Expenses
Fixed Assets

not expect to sell within the

In business, the term fixed asset applies to items that the company does
consume or

These are not resources used during production, such as sheet metal or commodities the
accounting period.
business would typically sell for income during that reporting year

unlike
Fixed assets sometimes described as tangible because they generally have some physical existence,
are
intellectual property, and trademarks. Examples of fixed assets
intangible assets such as goodwill, copyrights,
furniture and fixtures, vehicles, and personal
include manufacturing equipment, fleet vehicles, buildings, land,
Computers.