Asked by Lauren Terrell on Jul 15, 2024
Verified
Which of the following is incorrect?
A) Current liabilities are those that will be satisfied within one year or the operating cycle,whichever is longer.
B) Interest that will be paid in the future is included in the reported amount of a current liability.
C) Current liabilities impact a company's liquidity.
D) Working capital is equal to current assets minus current liabilities.
Operating Cycle
The average time period between the acquisition of materials for production and the receipt of cash from sales of the finished goods, critical for managing cash flow.
Current Liabilities
Financial obligations that a company is expected to pay within one year.
Liquidity
The ability to pay current obligations.
- Comprehend the characteristics of present-day debts and the manner in which they appear in the balance sheet.
- Comprehend the impact that liabilities have on working capital and liquidity.
Verified Answer
YS
Yuvraj SinghJul 15, 2024
Final Answer :
B
Explanation :
Interest that will be paid in the future is not included in the reported amount of a current liability. Current liabilities include obligations that are due within one year or the operating cycle, whichever is longer. Interest to be paid in the future is not due currently and therefore not included in current liabilities.
Learning Objectives
- Comprehend the characteristics of present-day debts and the manner in which they appear in the balance sheet.
- Comprehend the impact that liabilities have on working capital and liquidity.