Glossary
Current Liabilities
Obligations due within one year, such as accounts payable, short-term debt and accrued expenses.
On this page
Current liabilities are the debts and obligations a company must settle within the next year or operating cycle. They appear on the Balance sheet directly opposite Current Assets, and the comparison between the two is the quickest way to see whether a business can meet its near-term bills without raising new money.
What is included
- Accounts payable: amounts owed to suppliers for goods and services already received.
- Accrued expenses: wages, interest, taxes and other costs incurred but not yet paid.
- Short-term debt: bank lines, commercial paper and other borrowings due within a year.
- Current portion of long-term debt: the slice of a multiyear loan or bond that comes due in the next 12 months.
- Deferred (unearned) revenue: cash collected for products or services still to be delivered, common at software and subscription firms.
Reading them in context
Not all current liabilities are equal. Deferred revenue is an obligation to deliver, not to repay cash, and a large balance often reflects a healthy subscription business. Payables are usually rolled over in the normal course of trade. Short-term debt and maturing bonds are the items that must actually be refinanced or repaid, so a wall of debt coming due while credit markets are tight is the classic warning sign.
Some strong companies run with current liabilities above current assets on purpose: large retailers that collect cash from shoppers immediately but pay suppliers 30 to 60 days later fund part of their business this way. Context, trend and the industry norm matter more than any single threshold.