Long-Term Liabilities Are Distinguished from Current Liabilities on the Basis

question 37

Multiple Choice

Long-term liabilities are distinguished from current liabilities on the basis of:

• A) Whether the liability is to be paid within the operating cycle or one year, whichever is longer.
• B) Whether the liability is to be paid out of current assets within the operating cycle or one year, whichever is longer.
• C) Whether the liability is to be paid within one year or less.
• D) Whether the liability is to be paid within the operating cycle of the business, if it is less than one year.

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Definitions:

Production Level

The quantity of goods or services that a company produces within a given period, often directly affecting revenues and profitability.

Capital Intensity Ratio

A measure of how much capital is needed in relation to labor to produce a given level of output.

Operating Capacity

The maximum output a company can produce using its resources efficiently under normal conditions.

Net Fixed Assets

The value of a company’s property, plant, and equipment minus any depreciation that has been accounted for.