Liabilities

Liabilities (Definition)

Liabilities are a companys financial debts or obligations that arise during the course of its business operations.

Key aspects of liabilities include:

1. Represent amounts owed to creditors, suppliers, and other parties
2. Divided into current liabilities (due within one year) and long-term liabilities
3. Recorded on the balance sheet opposite assets
4. Include items such as accounts payable, loans, mortgages, and deferred revenues
5. Used in calculating important financial ratios like debt-to-equity ratio
6. Can impact a companys creditworthiness and borrowing capacity
7. Proper management of liabilities is crucial for maintaining financial health

Understanding and effectively managing liabilities is essential for maintaining a companys financial stability and creditworthiness.