Question

Difference between current liabilities and liquid liabilities

Answer 1

Liquid liabilities are those liabilities or debt obligations which a firm has to pay within a year.

Have you noticed that the above given definition seems similar to that of current liabilities. So, what makes the two terms different from each other?

Liquid liabilities highlight more liquid aspect of liabilities. The difference between the two term is that, to arrive at liquid liabilities, one has to calculate all the current liabilities except bank overdraft and cash credit facilities (these must be excluded only if they become a permanent mode of financing).

So, put it very simply, it can be said that all liquid liabilities represent current liabilities too but all current liabilities do not represent liquid liabilities.