Question

What are the differences between current and long-term liabilities? Provide a few examples of each as applied to your chosen industry. What balance between current and long-term liabilities is best for the financial health of your company or organization?

Answer 1

Current liabilities:
They are the financial obligations that are due in one year:
Accounts payable, Accrued Expenses, Tax payable, payroll liabilities, Dividend declared.

Non- Current liabilities:
They are the financial obligations that are due after one year:
Long term loans, deferred tax liabilities etc.

The ratio of current to long term liabilities changes from industry to industry.

For an Auto Mobile industry or Utility business industry this ratio is typically 0.1 to 0.4

Because such industry has very huge long term borrowings.