A current liability is the opposite of a current asset. It is a financial obligation which a company is expected to have to discharge within a short period of time, sometimes formally defined as one year or the current financial year. Liabilities are anything for which the company will have to pay out money. The most common liability for a company is the payment given to its suppliers for materials used or services required in its own business processes. Although long-term loans are not considered current liabilities, the interest payments due on them are. Other common current liabilities include wage and salary payments due to employees, refunds to customers for defective goods previously supplied, any money to be paid in court through contrary legal judgements such as product liability law suits or complaints by former employees.
When the sum of current liabilities is divided into the sum of current assets, the result is called the current ratio, which financial analysts consider one of the best measures of a company’s liquidity, in others words its financial viability in the short term. When current liabilities become unmanageable large, a company can be forced into bankruptcy even if it has large long-term assets and high levels of profitability.