what is current liabilities

Current liabilities are a companys short-term financial obligations that are due within one year or within a normal operating cycle. They are typically settled using current assets, which are assets that are used up within one year, such as cash or accounts receivable. Examples of current liabilities include accounts payable, short-term debt, dividends, and notes payable as well as income taxes owed. The analysis of current liabilities is important to investors and creditors as it can give a picture of a companys financial solvency and management of its current liabilities. The aggregate amount of current liabilities is a key component of several measures of the short-term liquidity of a business, including the current ratio, quick ratio, and cash ratio. The current ratio is calculated by dividing current assets by current liabilities, and a ratio higher than one means that current assets, if they can all be converted to cash, are more than sufficient to pay off current obligations.