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:

Absolute Advantage

A condition in which a country, individual, or firm can produce a good or service at a lower cost per unit than competitors.

Specialization

Focusing on a narrow area of expertise or production, often leading to increased efficiency and productivity in that area.

Current Assets

Assets on a company's balance sheet that are expected to be converted into cash, sold, or consumed within a year or the business's operating cycle, whichever is longer.

Current Liabilities

Short-term financial obligations that are due within one year, indicating the amount a company owes its creditors and others.