Can a Company Operate Without Current Liabilities?

What is an Asset? Liability? And how do they differ?

An asset can be defined as any item that adds value to a company. In general, they are divided into current assets (Less then 1 year) and long term (Greater than 1 year). Some examples of assets are inventory, buildings, vehicles, cash, etc. A liability is the opposite of an asset, and can be defined as anything that a company is obligated to contribute assets to resolve. The most common example of a liability is a loan. A loan will allow initially provide a company with cash, but will have to pay it off at a later date with interest. The main difference between assets and liabilities it that assets add value, while liabilities take away value. A company that has more assets than liabilities will have positive equity.

Can a Company Operate Without Current Liabilities?

Although it is unlikely, it is possible for a company to operate without any current liabilities. A company that has ample cash reserves would be able to pay for all assets at the time of purchase. This is not typical because the time value of money prompts companies to invest their cash reserves. Another method of operating with without current liabilities would be financing all assets with long term liabilities. This is also not typical because a company can usually save money on financing costs by utilizing short term loans for seasonal needs.