The correct answer is: B. 12 month
Current assets are assets that are expected to be converted into cash, sold, or consumed within one year or the operating cycle, whichever is shorter. Examples of current assets include cash, accounts receivable, inventory, and short-term investments.
Current assets are important because they are used to finance a company’s operations. They are also used to pay off short-term debts. A company with a strong current asset position is in a good financial position to meet its short-term obligations.
The 12-month period is used as a benchmark for current assets because it is the standard accounting period. However, the specific period used may vary depending on the company’s industry and business cycle.
Here is a brief explanation of each option:
- Option A: 6 months. This is a common period used for short-term debt financing. However, it is not typically used for current assets, as these are expected to be converted into cash within one year.
- Option B: 12 months. This is the standard accounting period for current assets. It is a reasonable period of time for a company to convert its assets into cash.
- Option C: 18 months. This is a longer period than is typically used for current assets. It may be used by companies with a slower business cycle or by companies that have a large amount of inventory.
- Option D: 24 months. This is a very long period for current assets. It is not typically used by companies, as it is not realistic to expect to convert all assets into cash within two years.