What are Total Liabilities?

Total Liabilities include every obligation a company owes to external parties, classified as:

• Current Liabilities: Obligations due within one year (e.g., accounts payable, short‑term debt, tax payables, current deferred revenue, and other current liabilities).
• Non-Current Liabilities: Obligations due after one year (e.g., long‑term debt, non‑current deferred revenue, deferred tax liabilities, and other non‑current liabilities).

Why are Total Liabilities Important?

Total Liabilities are important because they:

• Indicate Financial Leverage: Show the extent of debt financing and the company’s reliance on external funds.
• Assess Solvency: Help determine if a company can meet its obligations through its asset base and cash flows.
• Inform Risk Analysis: Higher liabilities may increase financial risk, affecting credit ratings and borrowing costs.

How are Total Liabilities Calculated?

Total Liabilities are calculated by summing all liabilities reported on the balance sheet:

1Total Liabilities = Total Current Liabilities + Total Non-Current Liabilities

Where:

• Total Current Liabilities include all obligations due within 12 months.
• Total Non-Current Liabilities include all obligations due beyond 12 months.

Additional Considerations

• Debt-to-Equity Ratio: Comparing Total Liabilities to Total Equity helps assess the capital structure and leverage.
• Maturity Profile: Reviewing the timing of liability maturities aids in liquidity planning and refinancing strategy.
• Covenants and Restrictions: Many liabilities carry covenants that may restrict dividends, additional borrowing, or asset sales, affecting operational flexibility.