What percent of the farm's total liabilities are due and payable in the next 12 months?

What percent of the farm's total liabilities are due and payable in the next 12 months?

• A. 24%
• B. 36%
• C. 48%
• D. 60%

Answer: (B)

The main idea here is liquidity in relation to debt timing. To see what percent of total liabilities are due in the next 12 months, you compare what portion is current liabilities (the debts that must be paid within a year) to total liabilities (current plus long-term obligations). The fraction current liabilities divided by total liabilities, times 100, gives that percentage. So a result of 36% means about one-third of the farm’s debt must be settled within the coming year, with the remaining two-thirds being long-term obligations. This has direct implications for cash flow—there’s a significant but not overwhelming near-term repayment burden, which the farm must plan for in seasonal cash flow or refinancing. If the near-term portion were higher (for example, 48% or 60%), short-term liquidity would be tighter and cash flow pressures would rise. If it were lower (for example, 24%), more debt sits long-term, reducing immediate repayment needs but potentially increasing interest costs or refinancing risk over time. Therefore, 36% correctly reflects the proportion of liabilities due within the next year.

The main idea here is liquidity in relation to debt timing. To see what percent of total liabilities are due in the next 12 months, you compare what portion is current liabilities (the debts that must be paid within a year) to total liabilities (current plus long-term obligations). The fraction current liabilities divided by total liabilities, times 100, gives that percentage.

So a result of 36% means about one-third of the farm’s debt must be settled within the coming year, with the remaining two-thirds being long-term obligations. This has direct implications for cash flow—there’s a significant but not overwhelming near-term repayment burden, which the farm must plan for in seasonal cash flow or refinancing.

If the near-term portion were higher (for example, 48% or 60%), short-term liquidity would be tighter and cash flow pressures would rise. If it were lower (for example, 24%), more debt sits long-term, reducing immediate repayment needs but potentially increasing interest costs or refinancing risk over time. Therefore, 36% correctly reflects the proportion of liabilities due within the next year.