Liabilities are financial obligations or debts a company owes to another party, typically due within a certain timeframe.
For example, a retail business's liabilities include $25,000 in accounts payable owed to suppliers, $80,000 remaining on an equipment loan, and $15,000 in accrued wages — totalling $120,000 that the business is obligated to pay to outside parties.
Why it matters: They represent claims against the company's assets; excessive liabilities restrict agility and increase the risk of insolvency.
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