Financial Accounting - Liabilities and Interest Quiz

Current liabilities are obligations due within a year, and Notes Payable falls into this category.

The Current Ratio measures a company's ability to cover short-term liabilities with its most liquid assets.

Accounts payable is a liability representing money owed by a company to its suppliers or creditors.

Interest expense is calculated using the formula Principal amount * Interest rate * Time period.

The Balance Sheet provides a snapshot of a company's financial position, including long-term debt.

Accrued liabilities represent obligations that have been incurred but not yet recorded in the accounting books.

A contingent liability is a potential obligation dependent on future events, such as a lawsuit against the company.

Deferred revenue is money received but not yet recognized as revenue; it is a liability until the goods or services are delivered.

Bonds Payable is a long-term liability representing money borrowed and due to be paid back over an extended period.

A higher market interest rate decreases the present value of a bond due to lower future cash flows.

The debt-to-equity ratio measures the proportion of debt to equity, providing insights into a company's financial leverage.

Recording a bond issued at a discount increases liabilities (bonds payable) and decreases equity on the balance sheet.

A finance lease transfers ownership to the lessee, while an operating lease does not.

Interest expense for an installment note payable is calculated using the formula Principal amount * Interest rate * Time period.

The times interest earned ratio assesses a company's capacity to meet its interest obligations based on its earnings.