Current liabilities

Definition

Current liabilities are a company's debts or obligations that are due within one year. They are listed on the balance sheet and include items like accounts payable, short-term loans, and accrued expenses.

5 Must Know Facts For Your Next Test

1. Current liabilities are crucial for assessing a company's short-term financial health.
2. Common examples include accounts payable, wages payable, and short-term debt.
3. They are typically settled using current assets or by creating other current liabilities.
4. The management of current liabilities is essential for maintaining liquidity.
5. A high level of current liabilities relative to current assets can indicate potential liquidity problems.

Review Questions

• What types of obligations fall under current liabilities?
• Why is it important to manage current liabilities effectively?
• How do current liabilities impact a company's liquidity?

Related terms

Accounts Payable:

Money owed by a company to its creditors for goods and services received.

Accrued Expenses:

Costs that have been incurred but not yet paid.

Short-Term Debt:

Loans and financial obligations that are due within one year.