Liability

Liabilities are what you owe. On a company balance sheet they include trade payables, bank debt, bonds, taxes due, and other claims. Current liabilities fall due within a year; non-current liabilities stretch longer. Assets minus liabilities equals equity, the residual claim of owners. Rising liabilities are not always bad if they fund productive assets, but they always create claims on future cash.

Key takeaways

• A liability is a future sacrifice of economic benefits.
• Timing matters: short term bills stress liquidity more than long term debt.
• Off balance sheet commitments can still behave like liabilities in stress.
• Healthy firms match debt maturity to the life of what they finance.