Liability

Liabilities a.k.a. payables in a company setting, are amounts owed. Balance sheets are composed of assets on the left side, and liabilities plus equity on the right . At any one time, assets must equal liabilities plus equity. Any form of debt owed by a company is a liability to the company and an asset to the lender. Liabilities are broadly split into current (payable within a year) and long-term liabilities. Financial analysts used various liabilities-based ratios such as current ratio or debt-to-equity ratio to determine whether the amount of leverage (borrowing) a company has taken on relative to revenues and its ability to pay liabilities down on schedule makes them a good investment. In the context of banks, the principal liabilities are deposits.

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