The aggregate amount of an entity’s obligations that will be settled (paid off) using current assets. That is, the sum of all current liabilities, with maturities of less than a year- i.e., which fall due within a year.
This represents the total amount of notes payable, accounts payable, accrued expenses, unearned revenue, current portion of long-term debt and other short-term debt.
Relating total current assets to total current liabilities produces the so-called current ratio which reflects the ability of an entity to meets its current liabilities (using its current assets). In other words, it determines how much of an entity’s current liabilities can be covered by its current assets.
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