Which asset category includes cash and liquid assets that can be converted to cash within a year?

• A. Non-current assets.
• B. Fixed assets.
• C. Current assets.
• D. Long-term investments.

Answer: (C)

Liquidity drives how assets are classified. Current assets are those expected to be converted into cash or used up within one year or the operating cycle, whichever is longer. Cash and other highly liquid assets fit this group because their purpose is to meet near-term obligations, so they’re grouped with current assets.

Non-current assets are resources not expected to be realized within a year. Fixed assets (like buildings and equipment) are long-lived tangible assets, not typically converted to cash in the near term. Long-term investments are holdings intended to be kept beyond a year. Because of their longer horizon, they don’t belong in current assets.

So cash and liquid assets that can be turned into cash within a year are classified as current assets.