Current Assets and Cash Equivalents

Topics: Balance sheet, Asset, Finance Pages: 2 (419 words) Published: February 10, 2013
Write a 200- to 300-word response explaining what information would be found in each of the following groupings on a classified balance sheet and how that data might indicate the future success or failure of a business:  Current assets

 Long-term investments
 Property, plant, and equipment
 Intangible assets

Current assets on a balance sheet have components that include cash and cash equivalents, accounts receivable, and inventories. These usually can be converted into cash quicker than that of other assets because they are for near term uses. Cash equivalents are the funds invested in short term securities such as T-Bills. Accounts receivable are the owed funds to the specific company by its customers. Inventories are usually found in manufacturing businesses which include raw materials and other goods. These current assets play an important role in the valuation of a company. Lenders and investors look upon this part of the balance sheet to determine if the company has enough assets to sustain its debt .Another class of assets is known as fixed assets which is are a general name for describing property, plant, and equipment. This is important to success of a business because they are not purchased for selling purposes by are used for trading and providing better services. Fixed assets benefits are obtained by a business many years after its purchase. Long term investments are investments a company intends to hold for more than one year. These investments are carried on a balance sheet at cost or market value, whichever is less. This means that most of the time, the stocks the company owns are worth more than they are on the balance sheet. If you owned 50,000 shares of a business and they paid $10 per share, you would have $500,000 on the balance sheet under your investments. If your shares rose to $35 per share, the value of your holdings would be $1,750,000, but the balance sheet would continue to carry $500,000. so, the difference would not be...
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