Listen to a Business English Dialogue about Current asset
Larry: Hey Scarlett, do you know what a current asset is in finance?
Scarlett: No, I’m not sure. Can you explain it to me?
Larry: Sure! A current asset is something a company owns that can be converted into cash within a year, like cash itself, accounts receivable, or inventory.
Scarlett: Oh, I see. So, it’s basically something that a company can use or sell quickly to meet its short-term financial obligations?
Larry: Exactly! It helps companies maintain liquidity and cover day-to-day expenses.
Scarlett: That sounds important. Can you give me some examples of current assets?
Larry: Sure! Besides cash and accounts receivable, current assets can also include short-term investments and prepaid expenses.
Scarlett: Got it. And why is it important for companies to keep track of their current assets?
Larry: It helps them assess their liquidity and financial health. If they have enough current assets to cover their short-term liabilities, it’s a good sign.
Scarlett: That makes sense. How do companies calculate their current ratio?
Larry: They divide their total current assets by their total current liabilities. It gives them a quick snapshot of their ability to meet short-term obligations.
Scarlett: Thanks for explaining, Larry. I feel like I have a better understanding of current assets now.
Larry: No problem, Scarlett. It’s an important concept in finance and accounting, so it’s good to grasp the basics.