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Current liabilities (short-term liabilities)

Current liabilities (also called short-term liabilities) are debts a company must pay within a normal operating cycle, usually less than 12 months (as opposed to long-term liabilities, which are payable beyond 12 months).

Paying off current liabilities is mandatory. To do so, a company must carefully manage the relationship between current liabilities and current assets. The difference between them is referred to as working capital. It is one of six calculations a company looks at to assess how liquid its assets are.

Current liabilities appear along with long-term liabilities on the balance sheet. Together, these represent everything the company owes.

More about current liabilities

The balance sheet below shows ABC Co. had $70,000 in current liabilities as of March 31, 2012. The company has $120,000 in current assets available to cover its current liabilities; this is a healthy working capital balance.