Liabilities

Liabilities is the general term for what the business owes. Liabilities are long-term loans of the type used to finance the business and short-term debts or money owing as a result of trading activities to date . Long term liabilities, along with Share Capital and Reserves make up one side of the balance sheet equation showing where the money came from. The other side of the balance sheet will show Current Liabilities along with various Assets, showing where the money is now.

Liquidity Ratio indicates the company´s ability to pay its short term debts, by measuring the relationship between current assets, for example, those which can be turned into cash against the short-term debt value.

Updated On: 09.10.04