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Current liabilities are amounts that must be paid within a short period of time usually less than a year

(True / False)

User Yrpalnoob
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Final answer:

True, current liabilities must be paid within a short period, usually less than a year, and are listed on the balance sheet which details a company's assets and liabilities. Banks must manage the asset-liability time mismatch between customer withdrawals and loan repayments to secure their bank capital.

Step-by-step explanation:

The statement is true; current liabilities are indeed amounts that must be paid within a short period of time, typically less than a year. These short-term financial obligations are listed on a company's balance sheet, an accounting tool that outlines a company's financial position at a given point in time by detailing its assets and liabilities. The balance sheet reflects the asset-liability time mismatch, a situation where, for example, a bank's customers can withdraw their deposits (liabilities) in the short term, while loans the bank has issued (assets) are typically repaid over a longer term. Managing this mismatch is crucial for the bank's financial health and is a factor in determining its bank capital, which is essentially the bank's net worth and acts as a cushion against potential losses.

User Jon Mountjoy
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