Which of the Following is Not a Current Liability? A Guide to Understanding Financial Statements

Current liabilities are debts or obligations that are due within one year. They are typically listed on a company's balance sheet as part of its short-term liabilities. Some common examples of current liabilities include accounts payable, short-term loans, and accrued expenses.

Which of the following is not a current liability?

The answer is long-term debt. Long-term debt is a type of debt that is due more than one year in the future. It is typically listed on a company's balance sheet as part of its long-term liabilities.

Here is a table summarizing the key differences between current and long-term liabilities:

Using Current Liabilities to Assess a Company's Financial Health

Current liabilities can be used to assess a company's financial health in a number of ways. For example, a company with a high level of current liabilities relative to its assets may be at risk of defaulting on its debts. Similarly, a company with a low level of current liabilities relative to its assets may be able to withstand unexpected financial shocks more easily.

Here are some tips for using current liabilities to assess a company's financial health:

• Compare current liabilities to assets. A company with a high level of current liabilities relative to its assets may be at risk of defaulting on its debts.
• Compare current liabilities to sales. A company with a high level of current liabilities relative to its sales may be struggling to generate enough cash to cover its expenses.
• Look for trends in current liabilities. A company with a consistently increasing level of current liabilities may be at risk of financial distress.

Success Stories

There are many examples of companies that have used current liabilities effectively to improve their financial performance. For example, Apple Inc. has consistently used its strong cash position to pay down its current liabilities, which has helped to improve its credit rating and reduce its cost of borrowing.

Another example is Amazon.com, Inc., which has used its large customer base to generate a steady stream of cash flow, which has allowed it to invest in new businesses and expand its operations.

Conclusion

Current liabilities are an important part of a company's financial statements. They can be used to assess a company's financial health and make informed investment decisions. By understanding the different types of current liabilities and how they are used, investors can make better informed decisions about which companies to invest in.