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Can a business be successful with no current liabilities?

Is it possible for a business to be successful if the business does not have any current liabilities? Why?

Solution Preview

Let us first review some typical current liabilities:

1. Accounts payable
2. Accrued payroll
3. Accrued payroll taxes
4. Sales taxes payable
5. Current portion of long-term debt
6. Income taxes payable
7. Short term notes payable
8. Accrued interest payable
9. Dividends payable
10. Line of credit payable

Next let us consider what business policies it would take to NOT have any of these account balances:

1. All invoices are paid in cash when received
2. Payroll is paid on the last day of the accounting period for wages through that day
3. The payroll taxes are paid as the payroll is ...

Solution Summary

The solution first gives a list of 10 typical current liabilities and then explains how a business could operate with none of the 10. Secondly, the solution give four examples of types of businesses which may never have any current liabilities, simply by the nature of their businesses.

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