Module 8 Study Guide

Question 1

Current liabilities

Answer 1

indicates the ability of a company to pay its current liabilities from current assets.

Question 2

Liabilities

Answer 2

the debts owed by a business.

Question 3

Long-term liabilities

Answer 3

obligations that do not qualify as current liabilities.

Question 4

operating cycle

Answer 4

(or cash cycle) is the time it takes to begin with cash, buy necessary items to produce revenues (such as materials, supplies, labor, and/or finished goods), sell goods or services, and receive cash by collecting the resulting receivables.

Question 5

Clearly determinable liabilities

Answer 5

the existence of the liability and its amount are certain.

Question 6

Estimated liabilities

Answer 6

the existence of the liability is certain, but its amount only can be estimated.

Question 7

Contingent liabilities

Answer 7

obligations that (1) are payable within one year or one operating cycle, whichever is longer, or (2) will be paid out of current assets or create other current liabilities.