How are current liabilities defined?

Current liabilities are defined as obligations that a company expects to settle within one year or within its operating cycle, whichever is longer. This classification includes accounts payable, short-term loans, accrued expenses, and other debts that are due in the near term. It is essential for businesses to manage current liabilities effectively, as they impact cash flow and short-term financial health.

In contrast, long-term liabilities refer to obligations that are not due within the year, while assets converted into cash relate to current assets rather than liabilities. The answer indicating liabilities that exceed assets describes a financial position rather than a specific definition of current liabilities. Therefore, the correct understanding of current liabilities emphasizes their time-sensitive nature and connection to the company's immediate financial obligations.