Current assets are assets expected to be used, converted to cash or sold within the normal operating cycle or within twelve months. They comprise primarily trade receivables, inventories, prepaid expenses and cash and equivalents. Current assets are the primary driver of working capital and the focus of working capital normalisation in financial due diligence. Their quality — adequacy of bad debt provisions, inventory obsolescence reserves and accruals — directly conditions the defensibility of the normalised working capital used in price adjustment mechanisms.

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Example: a Swiss distributor presents CHF 8.5 million of current assets comprising trade receivables (CHF 4.2 million), inventories (CHF 3.1 million) and other current assets (CHF 1.2 million). Due diligence identifies CHF 380,000 of slow-moving inventory (>18 months stock age) and CHF 220,000 of under-provisioned doubtful receivables — restating working capital downward by CHF 600,000 and directly reducing the acquisition price via the completion accounts mechanism.

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Hectelion reviews current asset quality with granular provisioning analysis in every financial due diligence engagement.