Course 107: A Tour through the Balance Sheet
Assets
In this course
1 Introduction
2 Assets
3 Liabilities
4 Shareholders' Equity


Current Assets. Current assets are those likely to be used up or converted into cash within one business cycle, usually defined as one year. (For items that take a long time to manufacture, the business cycle may be longer.) This category is usually broken down into subcategories, of which the most common are the following: Cash. This doesn't refer to actual greenbacks sitting around in a vault but to money in low-risk, liquid investments such as money-market funds or government bonds. It is money that can be used for any purpose the company wants. Marketable securities. Money invested in the stock of other companies, ranging from a token amount to a substantial stake. It's not quite as liquid as cash. Current accounts receivable. Bills that the company hasn't yet collected but that are expected to be paid within a year. Inventories. There are several types of inventories, including raw materials that have not yet been made into a finished product, partially finished products, and finished products that have not yet been sold. Inventories are especially important to watch in manufacturing and retail firms. If a company's inventories rise, the company might be making or buying more goods than it can sell, which eventually translates into lower profits. Noncurrent Assets. Noncurrent assets are assets that are not expected to be converted into cash or used up within the reporting period. Like current assets, noncurrent assets are usually broken down into subcategories. Here are some of the most common categories used: Property, plant, and equipment (fixed assets). These are long-term assets that form the infrastructure of the company: land, buildings, factories, furniture, equipment, and so forth. These assets are sometimes referred to as fixed assets, because unlike items such as accounts receivable and inventories, they are independent of the volume of business the company is doing. Intangible assets. The most common form of intangible asset is goodwill, which arises when one company acquires another. Goodwill is the difference between the price the acquiring company pays and the equity of the target company. (Recall that equity is equal to assets minus liabilities; this will be discussed in more detail later in the course.) Especially for fast-growing technology companies, this difference can be quite large.

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