Non-Interest-Bearing Current Liability (NIBCL)
Candlefocus EditorCommon examples of non-interest-bearing current liabilities include accounts payable, dividends payable, taxes payable, wages or salaries, bonuses payable, workers' compensation, salaries insurance, and payroll taxes. Generally, non-interest-bearing current liabilities are the obligations to repay short-term debt, such as trade debt, that do not require a company to pay interest on its borrowings.
It is important for companies to keep track of their NIBCLs, as these obligations must be paid as soon as they come due. Companies can also use the information on their NIBCLs to plan for their future cash flows and expenses. By accurately tracking their liabilities, companies can better manage their organizational cash balance and only pay for expenses when absolutely necessary.
When assessing company creditworthiness, analysts use the estimated value of the NIBCLs to determine the total amount of funding a company needs. For example, if a company has NIBCLs worth $50,000 and current assets worth $50,000, the company must obtain additional financing to cover its short-term commitments. By implementing effective controls and monitoring, companies can ensure that their NIBCLs remain manageable.
Overall, non-interest-bearing current liabilities are important because they allow companies to pay for short-term commitments such as accounts payable, taxes, and wages while managing their cash balance and not having to pay interest. Companies must, therefore, understand and track their NIBCLs and plan their expenses accordingly to ensure they are not burdened with unmanageable interest payments.