Lesson 11 Essay - Write a 500-1,000-word essay describing...

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Write a 500-1,000-word essay describing what a current liability is. Provide examples to support your answer. A current liability can be defined as “ an obligation that is 1) due within one year of the date of a company's balance sheet and 2) will require the use of a current asset or will create another current liability. If a company's operating cycle is longer than one year, current liabilities are those obligation's due within the operating cycle” ("What is a current liability?"). Current liabilities are important because they impose constraints on the cash flow of the company and make it important that the company has adequate current assets to maintain liquidity. Current liabilities include, but are not limited to, short-term notes payable, accounts payable, dividends payable, payroll liabilities, current portion of long-term notes payable, and unearned revenue. The more liabilities a corporation possesses, the more current assets it must also possess to pay those liabilities.

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