What defines current liabilities?

Current liabilities are defined as debts or obligations that a business is required to settle within one year. This encompasses all financial commitments that must be paid off in the short term, typically within the operating cycle of the business. Examples include accounts payable, short-term loans, and accrued expenses.

The focus on a one-year timeframe is crucial because it helps businesses manage their liquidity and ensures they have sufficient resources to cover these short-term obligations as they come due. This classification is important in financial reporting and analysis, as it impacts a company's working capital and solvency position.

The other options do not fit the definition of current liabilities. Long-term obligations refer specifically to debts that extend beyond one year, which distinguishes them from current liabilities. Cash inflows are related to incoming funds and do not pertain to obligations. Lastly, inventory on hand represents assets available for sale rather than liabilities.