DECA Retail Merchandising Practice Exam

What type of assets can be converted to cash within one year?

1. Fixed assets

2. Current assets

3. Intangible assets

4. Liabilities

The correct answer is: Current assets

Current assets are those that are expected to be converted into cash within one year. This category includes cash itself, as well as accounts receivable, inventory, and other assets that are anticipated to provide liquidity within a short time frame. These assets are crucial for businesses as they need to maintain adequate liquidity to meet short-term obligations and operational needs. Unlike fixed assets, which consist of long-term investments such as property and equipment, or intangible assets, which represent non-physical assets like patents and trademarks, current assets are specifically designed to be readily accessible for immediate use. Liabilities, on the other hand, represent obligations that the company owes and do not qualify as assets. Therefore, current assets are the correct answer when considering what can be converted to cash within a year.