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[The following information applies to the questions displayed below.] In this module, you will learn about the role of liabilities in financing a business. Liabilities play a vital role in allowing a business to buy goods and services on credit, cover gaps in cash flows, and expand into new regions and markets. Liabilities are classified as current if due to be paid or fulfilled within the current operating cycle of the business or within one year of the balance sheet date (whichever is longer). All other liabilities are considered noncurrent or long-term.

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Knowledge Check 01 Which of the following statements about liabilities are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.)

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• Liabilities rarely play a significant role in financing business activities.unanswered
• Liabilities are created when a company buys goods and services on credit.unanswered
• Liabilities are created when a company obtains short-term loans to cover gaps in cash flows.unanswered
• Liabilities are created when a company issues long-term debt to obtain money for expan