Total Liabilities

Total Liabilities is an accounting and finance term and refers to the total amount of debts and obligations owed by a company to its creditors and other stakeholders.

Includes both current liabilities, which are debts and obligations that are due within a year or less, and long-term liabilities, which are debts and obligations that are due more than a year in the future.

Total liabilities are an important metric for evaluating a company's financial health and solvency, as it represents the company's total debt obligations and how much it owes to others. Investors and creditors use total liabilities to assess a company's ability to meet its debt obligations, and to determine the company's leverage or debt-to-equity ratio, which can impact its creditworthiness and financial stability.

Example:

  1. Obtain the company's balance sheet: The total liabilities of a company can be found on its balance sheet, which is a part of financial statement that shows a company's assets, liabilities, and equity.
  2. Identify the current liabilities: Current liabilities are debts and obligations that are due within a year or less, and may include accounts payable, accrued expenses, and short-term loans. Add up all of the current liabilities listed on the balance sheet.
  3. Identify the long-term liabilities: Long-term liabilities are debts and obligations that are due more than a year in the future, and may include long-term loans, bonds payable, and lease obligations. Add up all of the long-term liabilities listed on the balance sheet.
  4. Add the current and long-term liabilities: Once you have identified all of the current and long-term liabilities, add them together to get the total liabilities of the company.
  5. Other formula: Total Liabilities = Total Assets - Shareholders Equity

Let’s say a company has current liabilities of $1,000,000 and long-term liabilities of $2,000,000. The total liabilities of the company would be $3,000,000 ($1,000,000 + $2,000,000) or company has total assets of $4,000,000 and shareholders equity of $1,000,000. The total liabilities of the company would be $3,000,000 ($4,000,000 - $1,000,000).