Next video:
Loading the player...

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.

Related Articles
  1. Taxes

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  2. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
  3. Small Business

    Understanding Limited Liability

    Limited liability is a legal concept that protects equity owners from personal losses due to their ownership interest in the company.
  4. Investing

    Explaining Accrued Liability

    Accrued liability is an accounting term for an expense a business has incurred but has yet to pay.
  5. Investing

    Examples Of Asset/Liability Management

    In its simplest form, asset/liability management entails managing assets and cash inflows to satisfy various obligations; however, it's rarely that simple.
  6. Investing

    Reading the Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  7. Small Business

    What is Unlimited Liability?

    Unlimited liability means that the owners of a business are liable for the entire amount of debt and obligations of that business.
  8. Investing

    Debt Ratios

    Learn about the debt ratio, debt-equity ratio, capitalization ratio, interest coverage ratio and the cash flow to debt ratio.
  9. Investing

    Understanding The Federal Reserve Balance Sheet

    We are all connected to the Fed's balance sheet, and the currency notes that we hold are its liabilities.
Hot Definitions
  1. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  2. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  5. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
  6. Interest Rate Swap

    An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for ...
Trading Center