Obligation

AAA

DEFINITION of 'Obligation'

The legal responsibility to meet the terms of a contract. If the obligation is not met there is often recourse for the other party to the contract.

INVESTOPEDIA EXPLAINS 'Obligation'

In the financial world, obligation refers to an outstanding debt that a party must still repay - and if they do not pay, they default on the debt. For example, when the U.S. government issues Treasury bonds it has the obligation to pay back the principal to the debt holders.

RELATED TERMS
  1. Reference Obligation

    The specific underlying debt upon which a credit derivative is ...
  2. Bilateral Contract

    A bilateral contract is a reciprocal arrangement between two ...
  3. Breach Of Contract

    Violation of any of the agreed-upon terms and conditions of a ...
  4. Clean Your Skirts

    A slang phrase used in the equity market to refer to a trader's ...
  5. Degree Of Relative Liquidity - ...

    A liquidity metric that looks at a company's ability to support ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to ...
Related Articles
  1. Losing Money? Don't Blame Your Broker
    Personal Finance

    Losing Money? Don't Blame Your Broker

  2. Debt Reckoning
    Investing

    Debt Reckoning

  3. Are long-term U.S. government bonds ...
    Investing

    Are long-term U.S. government bonds ...

  4. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center