To calculate Home Depot’s total assets, simply add their current assets ($18,529,000) to their long-term assets ($25,474,000). For most B2B businesses, the business sends an invoice to their customers, giving them either 30, 60, or 90 days to settle their accounts and make their payment. Ready to learn how to calculate your current assets? These numbers show Home Depot has enough liquid assets to pay off current debts. Assume that you just opened a new business. Assets: $80,000 cash + $20,000 inventory $10,000 net profit = $110,000. What is field service management software? However, they don’t provide a full understanding of how your company is doing. The investor would either cash out for a loss or wait until there are more profits to sell. Simply put, your current assets are all of your assets added together. The quick ratio formula goes as follows: Quick Ratio = (Current Assets minus Prepaid Expenses plus Inventory) divided by Current Liabilities. ”, it’s simply the allocation of offsite resources to better serve customers, which includes features such as issuing invoices, scheduling employees, managing your workforce, and so much more. Current assets are expected to be consumed, sold, or converted into cash either in one year or in the operating cycle, whichever is longer. For the quick ratio formula, we’ll stick with our Home Depot Example. The first order of business is to fund the company to buy inventory for your new store. Equity is basically considered to mathematically be the difference between the total assets and total liabilities of a company. In the case of Home Depot, they demonstrate they have strong short-term liquidity and can afford to pay off their short-term debts using their current assets because they have more current assets than current liabilities. Typical current assets include cash, cash equivalents, short-term investments (marketable securities), accounts receivable, stock inventory, supplies, and the portion of prepaid liabilities (sometimes referred to as prepaid expenses) which will be paid within a year. The current ratio formula goes as follows: Current Ratio = Current Assets divided by your Current Liabilities, In the case of Home Depot, their current assets totaled $18,529,000, while their current liabilities totaled $16,716,000. The asset breakdownnow becomes $80,000 in cash and $20,000 in inventory. Common stock is more likely to be liquidated than preferred stock because common stockholders are completely reliant on the company profits for their profits. And if the inventory isn’t sold to customers by the end of the year, the business can easily liquidate the inventory for cash, even though it’s at a lower cost than what the company originally paid for the items.

Prepaid expenses refer to all the expenses you’ve paid for already but are underlying assets that have not been used or received. According to Accountingbase.com, common stock is neither an asset nor a liability; it is considered equity.