Question

The current assets of most companies are usually made up of:

a) Cash and inventory
b) Inventory and accounts payable
c) Cash and accounts receivable
d) Accounts receivable and accounts payable

Answer 1

The current assets of most companies usually consist of cash and inventory, which can be used to support the company’s short-term operational needs. Current assets are integral for a company’s short-term financial health and are listed on the company's balance sheet.

Step-by-step explanation:

The current assets of most companies are typically comprised of items that can or will be turned into cash within one year. The correct answer to the question is a) Cash and inventory. These are the components that can be readily used to fund the day-to-day operations of a company. Cash is straightforward as it's the money the company has on hand or in the bank. Inventory consists of all the goods that a company has which it intends to sell for a profit. On the other hand, accounts payable and accounts receivable are involved in this process too but function differently. Accounts receivable represents the money owed to the company by others for goods or services delivered, making it an asset. Accounts payable, however, represents the company’s obligation to pay off a short-term debt to its creditors or suppliers, which is considered a liability and not an asset.