Financial Statement Analysis Practice Test

Question: 1 / 400

What classification would current receivables fall under in a balance sheet?

Current assets

Current receivables are classified as current assets on a balance sheet because they represent amounts that are expected to be collected within one year or within the operating cycle of the business, whichever is longer. These receivables are the result of credit sales or services performed, and they are crucial for assessing a company’s short-term liquidity. Since they are converted into cash in the near term, they are vital for businesses to manage day-to-day operations and meet short-term obligations. This classification helps users of the financial statements understand how much cash may soon be available to the company. Current assets typically include cash, inventory, and accounts receivable, which all indicate resources that can be quickly turned into cash, making it essential for a healthy working capital position.

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Long-term investments

Operating expenses

Long-term liabilities

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