The classification of liabilities on the basis of timing of settlement, i.e. current and non-current, is useful as it helps decision-makers assess the firm's ability to meet all of the following except:
A) dividends.
B) profitability.
C) commitments which are part of the operating cycle.
D) capital repayments.

Question

Quizplus · Accepted Answer

The classification of liabilities on the basis of timing of settlement helps decision-makers assess the firm's ability to meet commitments which are part of the operating cycle (i.e. current liabilities) and capital repayments (i.e. non-current liabilities). It does not provide any information about profitability or the ability to pay dividends.

The Classification of Liabilities on the Basis of Timing of Settlement