{"id":134230,"date":"2023-12-05T18:38:05","date_gmt":"2023-12-05T18:38:05","guid":{"rendered":"https:\/\/www.techopedia.com\/?post_type=definition&p=134230"},"modified":"2023-12-05T18:38:05","modified_gmt":"2023-12-05T18:38:05","slug":"liability","status":"publish","type":"definition","link":"https:\/\/www.techopedia.com\/definition\/liability","title":{"rendered":"Liability"},"content":{"rendered":"
A liability refers to a company’s financial obligations that arise from past transactions or events. It is essentially a debt owed by a company to a third party. To settle liabilities, the transfer of company assets, such as cash, should occur in the future.<\/p>\n
Liabilities play a key role in a company’s financial position and are important to consider for financial analysis<\/a> and business valuation purposes.<\/p>\n By having a clear grasp of the different types of liabilities, their accounting treatment, and associated risks, stakeholders can better evaluate an organization\u2019s financial situation.<\/p>\n Liabilities are generally categorized on the balance sheet<\/a> as current and non-current liabilities. Here\u2019s a list of the types of obligations that fall into each category.<\/p>\n Current liabilities represent financial commitments that are expected to be settled within 12 months or less through the use of current assets or the creation of other current liabilities. Common examples include:<\/p>\n It’s crucial for a business to handle its short-term liquidity needs to fulfill current liabilities. Financial tools such as current and quick ratios help assess how well a company can cover its near-term obligations.<\/p>\n Any long-term financial obligations that exceed 12 months are considered non-current liabilities. These include:<\/p>\nTypes of Liabilities<\/span><\/h2>\n
Current Liabilities<\/h3>\n
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Non-Current Liabilities<\/h3>\n