Current LiabilitiesFinancial Statements
Liabilities consist of the various short and long term debts of the company. Current Liabilities are debts that are due to be paid within the year, usually due to suppliers and sometimes due to creditors. Current Liabilities consists of Accounts Payable, Accrued Expenses, Short Term Debt, Other Current Liabilities, and Debts Due for Repayment. Payment for Current Liabilities comes from Current Assets. You should always be sure a firm has enough current assets to pay their current liabilities.
Accounts payable are purchases on credit that must be reconciled within the near term. This ranges from 30 to 120 days. The longer the better, as cash that sits in the company’s coffers can gain interest for slightly longer with distant payables due date.
Accrued Expenses are billing obligations that the company realizes it owes, but may not have actually received bills for at the moment of the balance sheet’s creation. Any debts that will be owed but have not been invoiced are an Accrued Expense. This is the opposite of Prepaid Expenses; the company has been provided services and now must pay for them.
Short Term Debt
Short Term Debt is owed by the company within the next year. This liabilities category consists of debts that were created within the year and will be due within the same year. It primarily includes loans from banks but can include bonds issued out to the public or other corporations.
Debt Due for Repayment
Debt Due for Repayment consists of long-term obligations that have come due for payment in the current year. It may also be labeled as Long-Term Debt Due. Any corporation with long-term liabilities will eventually have Long Term Debt Due on its balance sheet. A strong business will have little long-term debt necessary for their service or product development and delivery operations, which results in very little long-term obligations ever coming due. Companies with large amounts of long-term liabilities will constantly larger amounts of long-term debt coming due.
Other Current Liabilities
Other Current Liabilities consist of any debts coming due within the period that does not fall under the previous categories. If they are literally labeled “Other Current Liabilities” you should look in the footnotes to determine what qualifies under this category.
Total Current Liabilities
Total Current Liabilities consists of all liabilities due within the current period.
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