Which of the following statements about current liabilities is true?
A) Current liabilities are listed in order of decreasing amounts in the current liability section of the balance sheet.
B) The amount of current liabilities has little implication for a company's liquidity.
C) The current liability section never contains any portion of long-term liabilities.
D) The current ratio is defined as current assets divided by current liabilities.

Question

Quizplus · Accepted Answer

The current ratio, which is a measure of a company's liquidity, is defined as current assets divided by current liabilities. Option A is incorrect because current liabilities are listed in order of maturity, not of decreasing amounts. Option B is incorrect because the amount of current liabilities is a common measure of a company's liquidity. Option C is incorrect because the current liability section may contain portions of long-term liabilities that are due within the next year, such as the current portion of long-term debt.

Which of the Following Statements About Current Liabilities Is True