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Total liabilities are the combined debts an individual or company owes. Total liabilities plus equity must equal total assets on a company’s balance sheet. A balance sheet highlights a company’s financial condition and comprises an integral part of its financial statement.

Calculate a company’s total liabilities by adding all short- and long-term liabilities, plus any off-balance-sheet liabilities the business incurred. Short-term liabilities are due within a year, while long-term liabilities are due in a year or longer. Loans, leases and taxes can fall into either category.

Total liabilities are important for investors to know and understand because they often reveal whether a business is likely to turn a profit or suffer a loss.

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