How do fixed assets differ from current assets?

Fixed assets are defined as long-term resources that a company uses in its operations to generate revenue, such as property, plant, and equipment. They are not expected to be converted into cash within a year and typically have a useful life extending beyond one accounting period. This classification signifies that they are integral to the company’s ongoing business functions and will provide economic benefits over time.

In contrast, current assets are resources that a company expects to convert into cash or use up within one year, such as inventory, accounts receivable, and cash itself. This distinction is crucial for financial analysis, as it helps stakeholders understand the company’s liquidity and operational efficiency.

The other choices present misunderstandings of these categories of assets. For example, while fixed assets may be subject to depreciation, this characteristic is not definitive for distinguishing them from current assets, making it less relevant than the fundamental differences in the time frame of their use and conversion to cash.