How do current assets differ from non-current assets?

Current assets differ from non-current assets primarily based on their expected liquidity and the timeframe in which they are anticipated to be converted into cash. Current assets are those that a company expects to convert into cash, sell, or consume within one year or within its operating cycle, whichever is longer. This category typically includes cash, accounts receivable, and inventory, which are essential for day-to-day operations and managing short-term financial obligations.

Non-current assets, on the other hand, are expected to provide value to the company over a longer period, typically beyond one year. These assets include property, plant, equipment, and intangible assets, which are used in the operations of the business but are not readily converted into cash in the short term.

The distinction between these two categories is critical for both financial reporting and assessing a company's liquidity and long-term viability. Understanding which assets fall into each category helps stakeholders make informed assessments of a company's financial health, cash flow capabilities, and operational efficiency.