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Online professor's response to: Questions

1. Georgia Lazenby believes a current liability is a debt that can be expected to be paid in one year. Is Georgia correct? Explain.

2 a. What are long-term liabilities? Give two examples.
b. What is a bond?

3. Contrast these types of bonds:
a. Secured and unsecured.
b. Convertible and callable.

4. Valentin Zukovsky says that liquidity and solvency are the same thing. Is he correct? If not, how do they differ?

Solution Preview

1. Georgia Lazenby is right. Current liabilities are liability that is usually payable within one year. These are very short term liabilities and the amount outstanding is much less than the long term liability. Examples of current liabilities are rent payable, salary outstanding etc.

2a. Long term liabilities are debt obligation of a company with a maturity of more than one year. These liabilities are not due immediately but are due on a future date. Companies generally make provisions every year so that it will be easier for them to pay them when it is due. Examples: Mortgage loan, lease obligations.
b. A Bond means an investor (who has the money) agrees ...

Solution Summary

This response defines current liabilities, long-term liabilities, bonds, and compares solvency and liquidity.