Future Obligations

Future Obligations

Introduction

The financial obligations of a firm in the short-run are shown under the head of current liabilities. These obligations are fulfilled by the firm within a one year period of time. There are several types of financial obligations that need to be paid by the firm for example creditors, accounts payable, short-term loans, notes payable and etc. All these financial obligations are recorded under the head of current liabilities in a balance sheet drafted by the firm at the end of a fiscal year. Now let's try to find out that what does these current liabilities show about the future financial obligations of the firm and what should we learn in order to properly fulfill are future financial obligations.

Discussion

The current liabilities section in the balance sheet shows that the firm will fulfill its obligations in the coming 12 to 6 months. It includes several amounts that the firm has to pay off quickly like payment of the suppliers, salaries of the employees, rent accrued, payment of utilities and maintenance, taxes, short-term loans and other obligations. Among these several current liabilities obligations the fulfillment date ends within a period of 30 or 90 days and for some it might extend to a period of one year. So firms that want not to damage their name or position in the market make sure that sufficient funds are available so that all the obligations are fulfilled on time and there is no further delay.

The different accounts of credit liabilities provide different financial analysis of the firm like a large amount of accounts payable shown on the balance sheet will provide an analysis that the firm was not able to pay the credit on time and thus made a poor purchase for the firm as financial obligations were not met on time. ...