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Definition
Total Current Assets are the asset that can be converted to cash or used to pay current liabilities within 12 months.
Total Current Assets
= Cash and cash equivalents + Accounts Receivable + Inventory + Other Current Assets
Total Current Assets is linked to the Current Ratio, which is the result of dividing total current assets by total current liabilities. It is frequently used as an indicator of a company's liquidity, its ability to meet short-term obligations.
Total Current Assets is also linked to Working Capital, Net working capital is calculated as Total Current Assets minus Total Current Liabilities.
Formula
Total Current Assets
=
Cash and cash equivalents +
Accounts Receivable +
Inventory +
Other Current Assets Explanation
In Ben Grahams calculation of liquidation value, inventory is only considered worth half of its book value, and accounts receivable is considered worth 75% of its value. Therefore the liquidation value is lower than calculated from total current assets.
Liquidation Value = Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) - total liabilities
Related Terms
Cash and cash equivalents,
Accounts Receivable,
Inventory,
Other Current Assets
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