Question

How are current assets different from non-current assets? How are current liabilities different from non-current liabilities? Can you provide an example of each based on the AvalonBay FY 2018 financial statements?

Answer 1

Assets can be divided into two categories: current and noncurrent. Current assets are items listed on a company's balance sheet that are expected to be converted into cash within one fiscal year. Conversely, noncurrent assets are long-term assets that a company expects to hold over one fiscal year and cannot readily be converted into cash. Current and noncurrent assets are located on the balance sheet. Current Assets assets represent the Current value of all assets that can be converted to cash and are used to fund the ongoing operations of the company and pay current expenses. Current assets include: Cash and cash equivalents Accounts receivables Prepaid expenses Inventory Marketable securities Cash is considered a current asset because it can be readily converted within one year and can be used to pay short-term debt. Accounts receivable consist of the expected payments from customers to be collected within one year. Inventory is also a current asset because it includes raw materials and finished goods that can be sold relatively quickly. Noncurrent Assets Noncurrent assets are company's long-term investments or long-term assets that have useful life of more than one year. Noncurrent assets cannot be easily converted to cash. Non-current assets include: Land Property, plant, and equipment Trademarks Long-term investments and goodwill Both fixed assets and intangible assets, fall under noncurrent assets. Fixed assets include property, plant, and equipment since they are tangi ble, meaning they are physical in na ture or can be touched. A company cannot easily liquidate property, plant, and equipment. For example, an auto manufacturer's production facility would be a noncurrent asset. Intangible assets are nonphysical assets, such as patents and copyrights. They are considered to be noncurrent assets because they provide value to a company but cannot be readily converted to cash within a year. Long-term invest ments, such as bonds and notes, are also considered noncurrent assets because a company usually holds these assets on its balance sheet for more than one fiscal year. Below is a portion of AvalonBay FY 2018 balance sheet as of the end of March 31, 2018. Current assets sit at the top of the balance sheet, highlighted in green, and include receivables due to Exxon, cash, and inventory. Noncurrent assets are below current assets, highlighted in blue, repre senting Exxon's long-term invest ments like oil rigs and production facilities listed under property, plant, and equipment. Current liabilities are colored in orange and include short-term debt owed by Exxon and taxes. Noncurrent liabilities are listed below and include long-term debt obligations Created with Mi Notes Scanned with CS CamScanner

CONDENSED CONSOLIDATED BALANCE SHEET (millions of dollars) Mar. 31, 2018 Assets Current assets Cash and cash equivalents 4,125 Notes and accounts receivable - net 24,686 Inventories Crude oil, products and merchandise Materials and supplies 13,879 4,169 1,456 48,315 40,350 Other current assets Total current assets Investments, advances and long-term receivables Property, plant and equipment - net Other assets, including intangibles – net Total assets 250,352 9,809 348,826 Liabilities Current liabilities Notes and loans payable Accounts payable and accrued liabilities Income taxes payable Total current liabilities 19,836 37,207 3,263 60,306 20,781 Long-term debt Postretirement benefits reserves 21,696 26,760 4,818 19,554 153,915 Deferred income tax liabilities Long-term obligations to equity companies Other long-term obligations Total liabilities
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