Asset refers to any item of value that a company owns. Assets may include cash, equipment, or property.
When referring to working asset, however, a qualification is added. A working asset is any item that is relatively liquid, meaning it can easily be converted into cash. The working asset is something that the company can easily convert to cash, ready for use in a short period of time.
In the balance sheet, the working asset is the sum of various items. These items can include cash and other cash equivalents, inventory, receivable accounts, prepaid expenses, as well as marketable securities. These items can be converted to cash within a year or less, making it possible for the company to use that money.
How is the working asset significant? Since the working asset is readily convertible to cash, it is often a key item that is looked into when a company goes bankrupt. These are the assets that are liquidated to pay off creditors and stockholders, if possible. More importantly, the working asset is one way by which companies can find cash to fund its daily operations.
The working asset is also called by other names such as circulating asset and floating asset. These two names reflect the fact that the assets covered constantly change in value and in quantity.
