What distinguishes current assets from other assets?

Current assets are specifically defined as those assets that are expected to be converted into cash or consumed within one year or one operating cycle, whichever is longer. This characteristic of liquidity is crucial, as it primarily serves the operational needs of a business, enabling it to meet short-term financial obligations. Examples of current assets typically include cash, accounts receivable, inventory, and short-term investments.

The other distinctions mentioned in the incorrect options help to clarify why option B is the correct choice. Fixed assets, as stated in one of the options, are long-term resources that are not expected to be liquidated within a year, such as machinery or buildings. Goodwill and intangible assets are also categorized as non-current assets, as they do not have a physical presence and typically involve longer-term value beyond a single operating cycle. Lastly, the notion that current assets must be only physical assets contradicts the definition, as many current assets (like cash and receivables) are not tangible.

Understanding these distinctions reinforces the importance of recognizing how current assets function within a business's overall asset structure and their role in maintaining liquidity for operational purposes.