What is Current Liabilities?
Explanation of Current Liabilities
The parties who are owed the current liabilities are referred to as creditors. Creditors can be further divided into two categories: secured and unsecured creditors. If the creditors have a lien on company assets, they are secured, otherwise unsecured. Companies determine their working capital, current ratio, quick ratio and cash ratio by using the amount of current liabilities. Creditors or analysts usually use the cash, current, and quick ratio for the determination of company’s capability to repay its short term expenses.
Companies close watch the current liabilities because business must have sufficient liquidity in order to ensure short term liabilities. Some of the common current liabilities are accounts payable, taxes payable, interest payable, accrued expenses, short term loan, and dividend payable.