The difference between current and non-current assets?
Вставка
- Опубліковано 3 лип 2024
- == ASK ME A QUESTION ==
/ economista
/ tetracarbon
-------------------------
Teddy Bear Waltz Kevin MacLeod (incompetech.com)
Licensed under Creative Commons: By Attribution 3.0 License
creativecommons.org/licenses/b...
Theme Music produced by Material Wonders - materialwonders.com
-------------------------
Happy Studies!
-Phillip
It helped better than lectures I am taking at my university, thank you so much
This helped a bunch, thanks!
Thank u..... this really helped me...for my exams
This is a REALLY long answer .... but if it helps you with your exam, here goes :
Assets and Liabilities are split into both current and noncurrent formats.
Current assets are any asset that are In the form of currency, or are likely to be converted into cash within the next 12 months, Or the next *operating cycle (See footnote).
Non-current assets are essentially assets That we expect to hold for more than 12 months. We often referred to these as being "fixed assets".
Current liabilities are any liabilities that are expected to be paid or settled within the next 12 months or the next operating cycle.
Non-current liabilities are any liabilities that are expected to be settled beyond 12 months, or well after the next operating cycle.
So why the difference?
The important thing here is about access to cash. This concept is known as "liquidity".
A business that has a large amount of current liabilities, but very small current assets is essentially going to run out of cash.
Imagine that you owe somebody $10,000 tomorrow, but you only have access to $50 at best. Quite frankly, you are in a lot of trouble!
Imagine now that you still have your $50, but you will have to pay somebody $1 million in 25 years time. So long as your business is healthy, there is a good chance that you will be able to produce $1 million worth of wealth between now and the next 25 years. So although $10,000 is absolutely minuscule when compared to $1 million, the fact that the $10,000 is in the immediate short term, is potentially life-threatening to your business.
So the concept of "current versus non-current" is really a question of how much cash can a business command within the short term.
I hope this has made sense to you, and is sufficiently clear.
Phillip Wong
*Footnote: The reason why we say "or the next operating cycle" rather than specifying 12 months, is because the accounting period can vary sometimes. For example, in most courses we will assume a 12 month accounting period being the Australian financial year ending on 30 June. In the United States they follow calendar years. In the UK they end on 30 March (which I always remember as in the UK they are silly enough to start on April Fools' Day).
Nevertheless, there are some businesses that do not operate on annual cycles. For example Woolworth's reports on 52 or 53 week cycles. NOT 12 MONTHS! This is because the weekly payroll cycle affects their revenues significantly. Monday is the quietest day, while on Thursday everybody gets paid, and consumption patterns change. For this reason, Woolworth's has decided to report by keeping the days of the week consistent, rather than strictly following 365(.25) days.
Thus because we can find occasional examples where the accounting period is not 12 months, we therefore say that an asset is "current" If it is in the form of cash, or to be converted into cash within the next 12 months or within the next operating cycle, as it is important to include businesses such as Woolworths that are not strictly annual.
Tetracarbon (Phillip Wong) wow ok ....thanks.....so i hv one more doubt.....when people say ..sam got a hold of 1000 shares of that company....what does that mean...i mean i get that the company gets money from the share holder but i really dont get the share part....whats the benefit of having a share...whats a share
a SHARE is a certificate of "part ownership" of a company. Companies make profits. Profits are distributed to the owners in the form of "dividends".
So what do I get for holding shares? I get dividends.
Tetracarbon (Phillip Wong) so if a firm is in trouble and wants money cuz of an unexpected event in the stock market and they give a small part of the business in form of share and get money inreturn and then the holder gets profit in form of dividends? So this is a game of money on money? And no goods or services can be taken under as share?
ERrrrrrmmmm.... At this stage I am now going to say "no". Pretty much everything you just described in that paragraph has a pretty major misconception - which is cool, yeah? Because it just means we can clear it up.
But basically, you need to talk to your teacher because that last post shows me there's more than one misconception there. =)
Super helpful! Love the positive energy :) Thank you
Thank you so much!
Sweet!!!
Thank you so much for this video. It was really helpful. Would it be possible for you to write the English term that says:' suppliers owe you money and will pay it within 30 days '? Thanks in advance.
I love the video thank you
thank u phil
3:52 why do we split up Current Assets and Non-Current Assets?
Cool
Define the following.
Non-current Asset.
Intangiable Asset
Who's here because it was linked for their class!
Hahahaha~~~~