Which of the following is a typical example of a current asset?

• A. Equipment
• B. Cash
• C. Long-term investments
• D. Goodwill

Answer: (B)

Liquidity and asset classification are being tested here. Current assets are resources a company expects to convert to cash or use up within one year or the operating cycle. Cash exemplifies this because it is already cash and is the most liquid form of asset, readily available to pay short-term obligations or fund operations. That immediate availability is what makes cash a textbook current asset and why it sits at the top of the current-assets category on the balance sheet. Other items described—equipment, long-term investments, and goodwill—are not current assets: equipment is a fixed asset used over many years, long-term investments aren’t expected to be converted within the year, and goodwill is an intangible asset that isn’t typically turned into cash quickly.