Which of the following best reports the amount of money a firm owes its creditors that is due within the next year?

• A. Noncurrent liabilities
• B. Shareholders' equity
• C. Retained earnings
• D. Current portion of long-term debt

Answer: (D)

Verified step by step guidance

1. Understand the concept of liabilities: Liabilities represent obligations a company owes to external parties, such as creditors. These can be classified as current liabilities (due within one year) or noncurrent liabilities (due after one year).
2. Identify the term 'current portion of long-term debt': This refers to the portion of a company's long-term debt that is due within the next year. It is classified as a current liability because it must be paid within the short-term timeframe.
3. Differentiate between the options provided: Noncurrent liabilities are obligations due after one year, shareholders' equity represents the owners' claim on the company's assets, and retained earnings are accumulated profits not distributed as dividends. None of these options directly represent short-term obligations.
4. Recognize the correct classification: The 'current portion of long-term debt' is specifically designed to report the amount of money a firm owes its creditors that is due within the next year. It is part of the current liabilities section on the balance sheet.
5. Conclude that the correct answer is 'current portion of long-term debt' because it accurately reflects the short-term obligations of the firm to its creditors.