What are Current Liabilities?

 

Current Liabilities represent the debts of a company that are due within the next year. Common Current Liabilities listed include short term debt payments, accounts payable, accrued expenses (such as employee compensation) and deferred taxes.

 

Current Liabilities are found on the balance sheet under the “Liabilities” section, located in a company’s 10-K or 10-Q report filed with the SEC. Reports filed with the SEC can be found here.

 

The example below is from Intel’s (INTC) 2012 2nd quarter earnings found here.

(Click to Enlarge)

 

Current Liabilities are used to evaluate a company’s short term financial health. Comparing a company’s Current Liabilities to its current assets can determine if a company is able to pay for its short term bills without having to take on additional debt or sell assets.

 

This comparison is made based on several evaluation metrics:

 

 

Interpretation of Financial Statements, Defines this as:

“For the most part these are debts contracted by the company in the ordinary course of operating the business, and presumably are payable within a year, at the most. In addition all other kinds of debts maturing within a year’s time are included among the current liabilities those most generally encountered may be described as follows:

Accounts payable,
Income taxes accrued,
Money borrowed from banks or others for a short-term.

In addition, that portion of originally long-term debt which must now be paid within a year will properly appear among the current liabilities.

Other current liabilities include primary accrued expenses such as salaries and wages. Also dividends payable, customer advances, and the like.”

 

 


Financial Statements: A Step-by-Step Guide to Understanding and Creating Financial Reports, Defines this as:

“Current liabilities are bills that must be paid within one year of the date of the balance sheet. Current liabilities or the reverse of current assets:

Current assets- provide cash within 12 months.
Current liabilities-take cash within 12 months.”

 

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