Home Investing Dictionary Investment Term Current Liabilities
Current Liabilities
Written by Kenny Foo   
Tuesday, 10 March 2009 10:14

Current liabilities or current liability are corporations' liabilities or debts that need to be cleared in cash within one year or the business cycle, whichever period is longer. On the other words, current liabilities are bills that are due to creditors and suppliers within a short period of time, usually within one year. In normal circumstances, the corporations need to convert current assets to cash to settle the current liabilities.Some examples of current liabilities are accounts payable, short term loans, interest payable, dividends, consumer deposits, tax reserves , and bonds payable. Current liabilities is the opposite of current assets and it can be found in balance sheet. Liabilities of corporations can be categorized to two category - current liabilities and non-current liabilities. Unlike current liabilities, non current liabilities are liabilities of corporations that can take more than one years to several years to settle.Current liabilities is commonly used in multiple investment formula such as current ratio, quick ratio,  and working capital.

Normal corporations' current liabilities can not be greater than the current assets. If the current liabilities for corporations are greater than the current assets, it means that the corporations might have difficulties to pay off its short terms debts within one year. In this case, this corporations are not good investments.

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Last Updated ( Tuesday, 10 March 2009 10:46 )
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