Which statement is true regarding Current Liabilities?

Current liabilities are obligations that a business must settle within one year. This encompasses debts such as short-term loans, accounts payable, and other financial obligations that need to be paid off in the near term.

By accurately identifying that current liabilities include loans needing repayment within a year, you recognize the importance of monitoring these obligations for effective cash flow management. Current liabilities are crucial for assessing a company's liquidity, as they represent immediate financial responsibilities that can impact cash flow and the ability to invest in other areas of the business.

In contrast, other options describe different facets of financial accounting. Long-term financial obligations are categorized as non-current liabilities, which have a repayment period extending beyond one year. The suggestion that current liabilities represent owned assets is misleading, as liabilities pertain to debts rather than assets, which are resources owned by the business. Lastly, claiming that current liabilities do not affect cash flow overlooks their direct impact; managing these liabilities is essential for maintaining sufficient liquidity to meet short-term financial commitments.