Current Assets vs. Noncurrent Assets: What's the Difference? (2024)

Current Assets vs. Noncurrent Assets: An Overview

Current assets are cash or cash equivalents, inventory, marketable securities, or any other asset that can be converted to cash within one year. Current assets let businesses pay their short-term debts and liabilities and fund day-to-day operations.

Noncurrent assets are real estate, trademarks, and other long-term investments. These are not as liquid as current assets because they generally take longer than a year to convert to cash.

Current Assets

Current assetsare considered short-term assets because they generally are convertible to cash within a firm's fiscal year. They are the resources a company needs to run its day-to-day operations and pay its current expenses. Current assets are generally reported on the balance sheet at their current or market price.

Current assets may include items such as:

• Cash and cash equivalents
• Accounts receivable
• Prepaid expenses
• Inventory
• Marketable securities

Cash and equivalents (that may be converted) may be used to pay a company's short-term debt. Accounts receivable consist of the expected payments from customers to be collected within one year. Inventory includes raw materials and finished goods that can be sold relatively quickly.

Another important current asset for any business is inventories. It is important for a company to maintain a certain level of inventory to run its business, but neither high nor low levels of inventory are desirable.

Noncurrent Assets

Noncurrent assetsare a company'slong-term investments, and cannot be converted to cash easily within a year. They are required for the long-term needs of a business and include things like land and heavy equipment.

Noncurrent assets are reported on the balance sheet at the price a company paid for them. It is adjusted for depreciation and amortization and is subject to being re-evaluated whenever the market price decreases compared to the book price.

Noncurrent assets may include items such as:

• Land
• Property, plant, and equipment (PP&E)
• Trademarks
• Long-term investments and goodwill—when a company acquires another company

Noncurrent assets may be subdivided into tangible and intangible assets. Some assets are also classified as fixed.

Fixed assets include property, plant, and equipment because theyare tangible, meaning they are physical; you can touch them. A company cannot liquidateits PP&E quickly. For example, an automanufacturer's production facility would be labeled a noncurrent asset.

Intangible assetsare nonphysical assets, such as patents and copyrights. They are considered noncurrent assets because they provide value to a company but cannot be readily converted to cash within a year. Long-term investments, such as bonds and notes, are also considered noncurrent assets because a company usually holds them on its balance sheet for over a year.

Key Differences

Current Assets vs. Noncurrent Assets Example

The portion of ExxonMobil's balance sheet pictured below from its 10-K 2021 annual filing displays where you will find current and noncurrent assets.

Current assets generally sit at the top of the balance sheet. Here, they include receivables due to Exxon, along with cash and cash equivalents, accounts receivable, and inventories. Total current assets for fiscal year end 2021 were $59.2 billion.

Noncurrent assets are listed below current assets. These represent Exxon's long-term investments, like oil rigs and production facilities that come under . Total noncurrent assets for fiscal year end 2021 were $279.8 billion.

The combined total assets are located at the very bottom; for the fiscal year end of 2021, they were $338.9 billion.

The Bottom Line

Current assets can be converted to cash within one year, and noncurrent assets take more than one year to convert. Distinguishing between the two is important for businesses, analysts, and investors because it helps them visualize a company's financial position and risk.