How is an asset classified as current or non-current?

An asset is classified as current or non-current primarily based on its expected conversion into cash within one year. This classification is critical for understanding a company's liquidity and financial health. Current assets are expected to be converted to cash or used within one operating cycle, usually within twelve months. This includes cash, accounts receivable, and inventory. Non-current assets, on the other hand, are long-term investments that are not expected to be liquidated within the next year, such as property, plant, and equipment.

The focus on the timeframe is essential for financial reporting, as it helps stakeholders determine how easily a company can meet its short-term obligations. The other options do not adequately address the fundamental criterion for asset classification in financial accounting. Market value, revenue type, and interest rates, while relevant in specific contexts, do not define the current or non-current status of an asset in the manner that expected cash conversion does.