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Liabilities

Definition:

Liabilities are the financial obligations a company owes to other entities. They are broken down into two categories, current and long-term liabilities. Current liabilities are those that have to be paid off in less than a year like short-term loans and accounts payable. Long-term liabilities are those that come due over a longer time frame like long-term debt.

If a company borrows funds in any way, shape, or form it will show up on one of the liabilities lines.

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Book Excerpt:

(Excerpts from Financial Intelligence, Chapter 12 – On the Other Side)

Most long-term liabilities are loans. But there are also other liabilities that you might see listed here. Examples include deferred bonuses or compensation, deferred taxes, and pension liabilities. If these other liabilities are substantial, this section of the balance sheet needs to be watched closely.

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