Asked by Ashley Combs on Jun 15, 2024
Verified
The classification of a liability as current or non-current is important because it may affect the evaluation of a company's liquidity.
Current Liability
Obligations that a company is expected to pay off within the coming year or its operational cycle, whichever is longer.
Non-current
Term used to describe assets or liabilities that are not expected to turn into cash, be consumed, or paid within one year or the operating cycle, whichever is longer.
- Uncover the classifications and defining traits of current and non-current liabilities.
Verified Answer
WP
Wendy PeredaJun 17, 2024
Final Answer :
True
Explanation :
The classification of a liability as current or non-current reflects the timing of payment, which can affect a company's ability to meet its short-term obligations. This information is important for evaluating a company's liquidity position, which is a measure of its ability to meet short-term liabilities with its current assets. Therefore, the classification of liabilities as current or non-current is relevant to assessing a company's financial health and creditworthiness.
Learning Objectives
- Uncover the classifications and defining traits of current and non-current liabilities.
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