The sum of all payables (including dividends), taxes, accruals and air traffic liabilities for airlines.
Benefit
Current liabilities shows the dollar amount of money the company owes to creditors within the next year, so it’s helpful in assessing financial health. A company with too many current liabilities relative to its short-term assets (cash, securities, receivables, and inventories) could fall victim to a cash crunch.
Origin
This information is found in the liabilities section of the company’s balance sheet. This information is updated weekly.
For the Pros
Current liabilities is often subtracted from current assets to arrive at working capital. Typically a financially healthy company will have positive working capital—its short-term assets exceed, or cover, its short-term liabilities. Current liabilities divided into current assets gives the current ratio. Typically a healthy company will have a current ratio of about two, meaning that current assets cover current liabilities two times. In a crisis, such a company could easily use its current assets to pay off its short-term creditors. Companies court disaster if they load up on current liabilities in order to fund the purchase of long-term assets, like factories or real estate. In these situations a company has a mismatch between its assets (which are long term) and its liabilities (which are short term). Without a nice cushion of short-term assets available to pay off liabilities that come due, a company could wind up in bankruptcy.