What is the key difference between current and non-current assets?

The key difference between current and non-current assets is indeed based on the expected time frame for conversion into cash. Current assets are expected to be converted into cash or consumed within one year, making them essential for the day-to-day operations of a business. Examples include cash, inventory, and accounts receivable. They are important for managing liquidity and are generally short-term in nature.

On the other hand, non-current assets, also known as long-term assets, are held by a business for more than one year. These assets are not intended to be converted into cash within the short term and include property, plant, equipment, and intangible assets such as patents and trademarks. Their purpose is typically related to long-term investment and growth rather than immediate cash flow.

This distinction is crucial for financial reporting and analysis, as it helps users of financial statements assess a company's liquidity, operational efficiency, and overall financial health. Understanding the classification of assets allows stakeholders to make informed decisions based on the timing of cash flows and investment strategies.