Question

3. Current assets. Define current assets without using the word “asset.”  

c. Explain what working capital is and how it is computed.

d. What are intangible assets?

Answer 1

3. Current Assets - Current Assets are the one which are there with the company to be sold over for consumption or their intendedd usage is expected in the company with an upcoming period of 12 Months or less than that which means within an year. Example of it are as Cash, Accounts Receivables, Prepaid Expenses, Inventory etc. These are the important items which plays a crucial role in day to day operating activities of the business. These are of great significance for any organisation becuse they play an important role in the daily business operations and the financial stability, liquidity and efficiency of the company. These are in the nature of permanent accounts which appears on the Balance Sheet of the company.

C. Working Capital - Working Capital which is also known as the Net Working Capital is nothing else but the excess of the Company's Current Assets over its Current Liabilities. Working Capital is a measure of company liquidity, solvency and efficiency. If the company is having a positive working capital which means that current assets are more than current liabilities is a good situation for the company which poses them with the better future growing prospective whereas negative working capital indicates that current liabilities are more than current assets which tells that the company is going wrong and may find themselves in a situation of debt trap in the long run which wil hamper it's growth objective. Moreover Working Capital is the excess which the company can use for the growth of the company.

Calculation of Working Capital = Current Assets - Current Liabilities

Current Assets includes Cash, Accounts Receivables, Shirt Ter Investment, Inventory etc.

Current Liabilities includes Accounts Payables, Short Term Liabilities etc.

D. Intangible Assets - Intangible Assets are the assets which are the assets of the company but it cannot be seen and does not have any physical existence. They are a part of long term assets of the company. The prominent examples of Intangible Assets are Goodwill, Patents, Trademarks, Copyright, Franchise etc These are the assets which are not in physical existence but they provide an organisation with the right to use them for a particular period of time which are intended to provide a competitive advantage for the long term success of the company. Just like the Fixed Assets Value of these assets also get reduced overtime like fixed assets as the intangible assets also gets amortized each year depending on thier usage period.