Short-term liability

Definition

Short-term liabilities are obligations that a company must settle within one year. These are typically listed on the balance sheet under current liabilities and include items such as accounts payable, short-term loans, and accrued expenses.

5 Must Know Facts For Your Next Test

1. Short-term liabilities are crucial for assessing a company's liquidity.
2. They appear on the balance sheet under current liabilities.
3. Common examples include accounts payable, wages payable, and short-term loans.
4. Short-term liabilities differ from long-term liabilities based on their due date, which is within one year.
5. Managing short-term liabilities effectively is essential for maintaining a company's financial health.

Review Questions

Related terms

Accounts Payable:

Amounts owed by a company to its suppliers for goods or services received but not yet paid for.

Current Liabilities:

Obligations that a company needs to settle within one year, including short-term debt and other similar debts.

Liquidity:

The ability of a company to meet its short-term financial obligations when they come due.