There are three categories on every company’s balance sheet, they are Assets, Liabilities, and Owners’ Equity. While Current Asset on the balance sheet is the first section in the asset section. As we all understand that all categories in a balance sheet are important, yet the current asset section has a special significance.
The simplest definition of current asset section inside a balance sheet is the part where the company shows cash and cash equivalent, or anything else that can be converted into cash in 12 months or less.
These assets are liquid assets since they can easily be converted into cash.
The Cash and Cash Equivalent
This section represents the current amount of money the company has in the bank. That money can be in the form of cash, certificates of deposit, saving bonds, and money invested in market funds. It basically shows you the money available on a business.
Questions usually appear about business cash is the proper amount of cash a company should have within its balance sheets. Generally, a company that has more cash is better. Yet, the excessive amount of it still makes investors unhappy.
Investors would be happier if the company use the money to pay out a dividend or reinvest it or save or spend it on a charity.
The Dividends and Cash-On-Hand
A sufficient amount of cash on hand will allow the management to both pay dividends and repurchase shares. Above them, the management has extra room whenever the company faces financial difficulties.
During the market drop, commonly, a stock investor will be the happiest if they have a large profitable business. That business usually owns enormous cash reserve accompanied with little to no debt,
These businesses, often time, can come in and gain advantages during a tough financial climate. They have the ability to buy their competitors with a fraction of their value.
