Liabilities and Financial Analysis

Topics: Generally Accepted Accounting Principles, Balance sheet, Revenue Pages: 3 (688 words) Published: December 8, 2012
Liabilities & Financial Analysis
Discuss current liabilities and long-term liabilities.  What are the differences between the two?  Illustrate your understanding of liabilities, making sure to identify major types of current liabilities. Respond to at least two of your classmates’ posts.

Current liability is a debt that a company expects to pay from existing current assets or through the creation of other current liabilities and within one year or the operating cycle, whichever is longer; the major types of current liabilities include notes payable, accounts payable, unearned revenues and accrued liabilities such as taxes, salaries and wages, and interest (Kimmel, Weygandt & Kieso, 2011). Financial statement users typically want to know if a company’s liabilities are current or long term so they will know which liabilities will have to be paid within one year. On the other hand, long-term liabilities are obligations that a company expects to pay more than one year in the future which are often in the form of bonds or long-term notes and are recorded in the long-term liabilities section of the balance sheet (Kimmel, Weygandt & Kieso, 2011). Separation of current and long-term liabilities is also important for when companies declare bankruptcy because they will know the order of payments that are due to creditors.

Kimmel, P.D., Weygandt, J.J., & Kieso, D.E. (2011). Financial accounting: Tools for business decision making (6th ed.).

 Colgate’s Annual Report 
Obtain a copy of Colgate’s annual report from the Ashford Online Library or from a valid academic source found elsewhere on the Internet.  Use this information to answer the following questions. If researching online, go to the Colgate company website ( Use the ratios discussed in Chapter 11 (dividend payout ratio and return on common stockholders’ equity) to evaluate Colgate’s dividend and earnings performance from a stockholder’s perspective. Your answer should...
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