Liabilities definition

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A company’s liabilities are the debts and obligations represented on its balance sheet. They are the opposite of assets.

Liabilities detract from a company’s total value, as they represent debts that will have to be paid over time. The form of the debt can vary, but may include business expenses, loans, unearned revenues or legal obligations.

There are two main types of liability that will be present on a balance sheet:

  1. Current liabilities, that will have to be paid off within one year
  2. Long-term liabilities, that can be paid off over more than one year

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Liabilities represent the future loss of assets, and as such are a key way of analysing a firm’s liquidity. See the fundamentals of a variety of shares here.

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