Current assets and current liabilities

What are current assets and current liabilities? Let’s define current assets and current liabilities, and then take a look at the current assets and current liabilities on the balance sheets of two of the biggest companies in the world. Current assets and current liabilities are both groupings of accounts on the balance sheet. A balance sheet is a picture at a point in time (usually the end of the year, or the end of the quarter) of what a company owns (on the left) and what a company owes (on the right). Besides assets (what a company owns) and liabilities (what a company owes to creditors), you will also find a group of accounts on the right-hand side called equity, which represents the book value of the shareholder capital. Asset accounts are grouped in either current assets or non-current assets, and liabilities accounts into current liabilities or non-current liabilities. The difference between current and non-current in both cases is within one year (current) versus longer than one year (non-current). Current assets are cash and other assets that are expected to be converted to cash within a year. Some examples of accounts in Current Assets: Cash, Accounts Receivable (amounts to be received from customers), Inventory (products available for sale), Prepaid Expenses (amounts paid but not expensed yet). Current Liabilities are amounts due to be paid to creditors within twelve months. Some examples of accounts in Current Liabilities: Accounts Payable (amounts to be paid to suppliers), Accrued Liabilities (an expense incurred but not yet paid), Short Term Debt. So the difference between current and non-current assets is whether this asset will be converted to cash within one year. The difference between current and non-current liabilities is whether the amounts are due within one year, or further out.

⏱️TIMESTAMPS⏱️
0:00 Current assets and current liabilities on the balance sheet
0:53 Current vs non-current
1:03 Current assets definition and examples
1:26 Current liabilities definition and examples
2:00 Current assets vs current liabilities example: Amazon
4:01 Negative working capital
4:36 Current assets vs current liabilities example: Apple

Philip de Vroe (The Finance Storyteller) aims to make strategy, #finance and leadership enjoyable and easier to understand. Learn the business and #accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers #financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!

[KnightCreator]

Thanks for this well explained topic, I have learned lots of new vocabulary and made it easy to understand for a new person in the stock market. I wish the video was longer and explained even more stuff to get more out of it, thank you.

[ahmadhiyyastudentchannel]

Thanks alot man.i can't really pay attention in class because it's soo boring and long.bit u tell me everything in 5 to 10min

[vikashbarnwal]

Hi

Appreciate your way teaching and understanding in easy way.

[konstancyja]

Exciting way to look on the companies 😃👍🏻

[snapbackwill]

Absolutely loving these videos - thank you so much! Quick question - In the Apple example at the end of the video when calculating the sum to determine 'Working Capital'; is having a negative value [-$2bn] a postive or a negative? If it is a negative, could you help to explain how Apple might have -$2bn and yet be in a strong position? Is it because the capital has been deployed in the same way I could put a deposit on a house for £20, 000, that would then be listed as -£20, 000 on the Balance Sheet but in reality is a positive as it now allows me to control a house? Thanks again!

[smitkotadiya]

can you please explain the "exciting bit" you described in video that how amazon suppliers and customers are financing more than amazon itself?

[matthew]

Great video, I'm sure I will be watching many more🍕

[RoyRogersMcFreelydollaSign]

Great video! Also for me, a non daily english speaking person, good understandable

[kokalti]

Im looking at BJ Wholesale company. Its Current assets are $1, 794 and Current liabilities of $2, 468. Which leaves the difference of -$674. (In millions). So does that mean the company either has to have free cash flow of at least 674 million a year to make ends meet, or borrow money to make ends meet? Thanks

[jamesperry]

_Great! Thanks for sharing and teaching._

[princejag]

My friend could you make a video on how to stop recording the financial transactions "Going Concern" basis if the company is on verge of collapse. Show it in a practical

[princejag]

Interesting! Based on your analysis what you suggest on Apple to go for organic or Acquisition strategy?

[timmypompom]

Hi, how come you left out accrued expenses when you were trying to get at the working capital? I thought working capital is equal to current assets minus current liabilities. Please let me know why, thanks. Great video!

[amukelanimashele]

thanks for the video. now i understand.

[gloriouscoral]

What about long term debts and net income?

[luciusthorson]

HI GOLDEN FAITH ACADEMY (GFA) STUDENTS