What defines a current liability?

A current liability is specifically defined as an obligation that a company expects to settle within one year or within its operating cycle, whichever is longer. This definition is critical for understanding a company's short-term financial health and liquidity.

When a company has current liabilities, it is usually expected to use current assets, such as cash or accounts receivable, to pay them off. This classification helps investors, creditors, and management assess the firm’s efficiency in managing its debts and its ability to meet short-term obligations.

The other options do not accurately reflect the concept of current liabilities. For example, an obligation that is payable after one year is classified as a long-term liability, while an obligation that is payable immediately suggests that it has already become due and is not typically encompassed in the current liabilities definition. Similarly, being payable as needed implies a level of discretion or timing that does not apply to liabilities, which are generally expected to be settled by a defined date. Thus, the correct choice reinforces the understanding of financial obligations that a company must manage in the short term.