Future Business Leaders of America (FBLA) Agribusiness Practice Test

What term describes liabilities that are payable within the year?

1. Current liabilities

2. Long-term liabilities

3. Fixed liabilities

4. Contingent liabilities

The correct answer is: Current liabilities

The term that describes liabilities that are payable within the year is known as current liabilities. Current liabilities represent the obligations that a business is required to settle in the near term, typically within one financial year. These can include accounts payable, short-term loans, and other similar debts that are due shortly. Understanding current liabilities is crucial for assessing a business's short-term financial health and liquidity. It allows stakeholders to evaluate the company's ability to meet its immediate obligations. Current liabilities are distinguished from long-term liabilities, which are due beyond one year, providing a clear picture of financial responsibilities the company faces in the short term versus the long term. Other terms like fixed liabilities and contingent liabilities do not apply in this context. Fixed liabilities (often referred to in different contexts) typically relate to long-term financial commitments or assets, while contingent liabilities depend on the occurrence of certain events to become actual obligations. Thus, the choice that accurately reflects liabilities due within one year is current liabilities.