Classifying liabilities as either current or long-term helps creditors assess:
A) Profitability.
B) The relative risk of a firm's liabilities.
C) The degree of a firm's liabilities.
D) The amount of a firm's liabilities.

Question

Quizplus · Accepted Answer

Classifying liabilities as either current or long-term helps creditors assess the relative risk of a firm's liabilities. Current liabilities are due within a year, while long-term liabilities are due over a year from the balance sheet date. Creditors may view a higher proportion of current liabilities as a greater risk because they must be paid off within a shorter period of time.

Classifying Liabilities as Either Current or Long-Term Helps Creditors Assess