Current Liabilities Differ from Long-Term Liabilities Based On

question 12

Multiple Choice

Current liabilities differ from long-term liabilities based on:

• A)the amount owed.
• B)the financial situation of the creditor.
• C)the interest rate charged.
• D)when the debt is due.
• E)current economic conditions.

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Definitions:

Solvency

The ability of a company to meet its long-term financial obligations and continue its operations into the foreseeable future.

Profitability

The ability of a business to generate earnings over its costs and expenses, reflecting its financial health and efficiency.

Working Capital

The difference between a company’s current assets and current liabilities, indicating its short-term financial health and efficiency.

Current Ratio

A liquidity ratio that measures a company’s ability to pay short-term obligations with its current assets.