Which of the following statements about current liabilities is true?
A)Current liabilities are listed in order of decreasing amounts in the Current Liabilities section of the balance sheet.
B)The amount of current liabilities has little implication for a company's liquidity.
C)The Current Liabilities 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 is defined as current assets divided by current liabilities, which is a measure of a company's liquidity. Option A is incorrect as current liabilities are listed in order of maturity, not decreasing amounts. Option B is incorrect as current liabilities have a direct impact on a company's liquidity. Option C is incorrect as some long-term liabilities may have portions that are due within the current period and would be included in the Current Liabilities section of the balance sheet.

Which of the Following Statements About Current Liabilities Is True