What It Is:
How It Works/Example:
Restricted cash (that is, cash that cannot be withdrawn or used for current operations), depreciable assets, receivables that are not due in 12 months or less, and land are examples of things that are not current assets.
Why It Matters:
Current assets are important because they indicate how much cash a company essentially has access to within the next 12 months outside of third-party sources. It is indicative of how the company funds its ongoing, day-to-day operations, and how liquid a firm is. The ratio of current assets to current liabilities is particularly important in judging liquidity.