Most companies pay current liabilities using:

• A. Long-term loans
• B. Issuing new shares of stock
• C. Revaluing fixed assets
• D. Cash generated from operations within the next year

Answer: (D)

Verified step by step guidance

1. Understand the concept of current liabilities: Current liabilities are obligations a company expects to settle within one year, such as accounts payable, short-term loans, and accrued expenses.
2. Recognize how companies typically pay off current liabilities: Companies generally use cash generated from their operating activities, which includes revenue from sales, collection of receivables, and other operational cash inflows.
3. Eliminate incorrect options: Long-term loans, issuing new shares of stock, and revaluing fixed assets are not typical methods for paying current liabilities. These methods are more relevant for financing or investment activities rather than operational cash flow.
4. Focus on the correct method: Cash generated from operations within the next year is the primary source for settling current liabilities, as it aligns with the short-term nature of these obligations.
5. Relate this to the cash flow statement: The cash flow statement's operating activities section provides insight into how much cash a company generates from its core business operations, which is crucial for paying current liabilities.