Multiple Choice
Which of the following is another term commonly used to describe a company's liabilities?
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9. Current Liabilities
Types of Liabilities
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A lien that only binds to a specific asset or property is known as what type of liability?
A
Current liability
B
Unsecured liability
C
Secured liability
D
Contingent liability
Verified step by step guidance1
Understand the concept of a lien: A lien is a legal claim or right against an asset or property, typically used as collateral to secure a debt.
Recognize the characteristics of a secured liability: A secured liability is a type of debt or obligation that is backed by specific assets or property as collateral. If the debtor fails to meet the obligation, the creditor has the right to seize the collateral.
Differentiate between the options provided: Current liability refers to short-term obligations due within a year, unsecured liability refers to debts not backed by collateral, and contingent liability refers to potential obligations dependent on future events.
Identify the correct answer based on the definition: Since the lien binds to a specific asset or property, it aligns with the definition of a secured liability.
Conclude that the correct answer is 'Secured liability' because it matches the description of a lien tied to a specific asset or property.
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