Current Liabilities

Current Liabilities

Current liabilities are a company’s short-term financial obligations that are due within one year or a normal operating cycle. An operating cycle, also referred to as the cash conversion cycle, is the time it takes a company to purchase inventory, convert it to sales, and collect cash from its customers. Current liabilities are typically settled using current assets, which are assets that are used up within one year. Current liabilities appear on a company’s balance sheet and include accounts payable, accrued liabilities, short-term debt, and other similar debts.

Meaning of Current Liabilities

Current liabilities are obligations that a company has to pay within a short period, usually less than a year. They arise from the normal operations of the business, such as buying goods from suppliers, paying wages to employees, or borrowing money from banks. Current liabilities are important for a company’s liquidity and solvency, as they indicate how much cash or current assets the company needs to generate or raise to meet its obligations.

Definition of Current Liabilities

According to Investopedia, current liabilities are defined as:

Current liabilities are a company’s short-term financial obligations that are due…