Which of the following is not a current liability?
Which of the following is not a current liability?
Every business, irrespective of its size or industry, has both assets and liabilities. Assets are resources that the company owns and can be converted into cash, while liabilities are debts that the company owes. Liabilities can be either current or non-current.
Current liabilities are debts that are due within one year, while non-current liabilities are debts that are due more than one year from now.
Some examples of current liabilities include:
- Accounts payable
- Short-term debt
- Accrued expenses
- Unearned revenue
Some examples of non-current liabilities include:
- Long-term debt
- Deferred revenue
- Capital leases
Determining which liabilities are current and which are non-current is important for several reasons. For example, current liabilities are used to calculate a company's working capital, which is a measure of the company's liquidity. Non-current liabilities are used to calculate a company's debt-to-equity ratio, which is a measure of the company's financial leverage.
Here is a table of current and non-current liabilities:
| Current Liabilities | Non-Current Liabilities |
|---|---|
| Accounts payable | Long-term debt |
| Short-term debt | Deferred revenue |
| Accrued expenses | Capital leases |
| Unearned revenue |
It is important to note that not all liabilities are current liabilities. For example, a company's long-term debt is not a current liability because it is not due within one year.
Here is a table of liabilities that are not current liabilities:
| Liability | Type of Liability |
|---|---|
| Long-term debt | Non-current liability |
| Deferred revenue | Non-current liability |
| Capital leases | Non-current liability |
Understanding the difference between current and non-current liabilities is important for businesses of all sizes. By properly classifying its liabilities, a company can better manage its cash flow and financial risks.
Success Stories
- Company A was able to improve its working capital by $1 million by reducing its current liabilities.
- Company B was able to reduce its debt-to-equity ratio by 10% by refinancing its long-term debt.
- Company C was able to avoid a financial crisis by carefully managing its liabilities.
FAQs About Which of the Following is Not a Current Liability
Q: What is the difference between a current liability and a non-current liability?
A: A current liability is a debt that is due within one year, while a non-current liability is a debt that is due more than one year from now.
Q: Why is it important to classify liabilities as current or non-current?
A: Classifying liabilities as current or non-current is important for several reasons. For example, current liabilities are used to calculate a company's working capital, which is a measure of the company's liquidity. Non-current liabilities are used to calculate a company's debt-to-equity ratio, which is a measure of the company's financial leverage.
Q: What are some examples of current liabilities?
A: Some examples of current liabilities include accounts payable, short-term debt, accrued expenses, and unearned revenue.
Q: What are some examples of non-current liabilities?
A: Some examples of non-current liabilities include long-term debt, deferred revenue, and capital leases.
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