Frequently Asked Questions(FAQ)

Why are Accounts Payable a current liability?

Accounts Payable is a current liability because it describes the amount of money owed to creditors in less than one year.

What is the Current Liabilities Ratio?

The Current Liabilities Ratio, or the Current Ratio, measures a company’s ability to cover its short-term debt obligations. It is calculated by dividing total current assets by total current liabilities.

Why do investors care about current liabilities?

Investors analyze a company’s current liabilities to gain insights into its financial solvency and whether it can meet its short-term financial obligations.

How does a company manage current liabilities?

Most companies manage and settle current liabilities by liquidating current assets, such as cash and accounts receivable.

About the Authors

Tetiana Sitiugina-Babiuk

Written by: Tetiana Sitiugina-Babiuk

Financial Sector Specialist and Content Strategist

Independent writer, content strategist, and financial sector specialist. Tatiana has an extensive experience in working with financial institutions such as Bank of Canada and Risk Management unit at FinDev Canada. She holds an MA in Financial Risk Management from the University of Toronto.

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