For an investment to be classified as a current asset, A. the investment must be easily convertible to cash. B. the investor must intend to convert the investment to cash within one year or current operating cycle, whichever is longer, or use it to pay a current liability. C. both a and b must be met for the investment to be classified as a current asset. D. neither a or b are relevant to the classification of an investment as a current asset.

Question

Kayley Mahoney

Business

13 September, 11:27

For an investment to be classified as a current asset, A. the investment must be easily convertible to cash. B. the investor must intend to convert the investment to cash within one year or current operating cycle, whichever is longer, or use it to pay a current liability. C. both a and b must be met for the investment to be classified as a current asset. D. neither a or b are relevant to the classification of an investment as a current asset.

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Answers (1)

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Lucia Sullivan · Answer 1

For an investment to be considered as current asset, it has to be convertible into cash and within one year of business operation or current operating cycle, whichever is longer. Hence, the correct answer is option C.

Explanation:

In Business Studies or Accounting, current assets are identified as those assets which are normally convertible into cash value usually within 1 year of business operation and used to pay any current liability. Therefore, any short term investment in business which can be used or utilized during the regular business operation and converted into cash value within one year of operation can be termed as current assets. Therefore, to satisfy the conditions to qualify as current asset, any business investment has to be cash convertible which has to be conducted within one year of operation or the operating cycle, depending on their duration.