Financial Education

In the course of business, firms can accrue two types of liabilities: operating liabilities and financial liabilities.

Operating liabilities are the consequence of normal operating practices. Operating and trade liabilities occur when the company owes money to suppliers (accounts payable) or employees (wages payable) for goods and services that have already been provided but not yet paid for. In addition, in some business customers are required to pay a deposit before receiving the goods and services they are buying. In such cases, the amount of the deposit creates a liability that the firm must satisfy by delivering the promised goods or service or by refunding the deposit.

Financial liabilities represent borrowings from banks or other lenders that must be repaid with interest.

For more information, see all articles on: Accounting, Financial Statement Analysis, Fundamental Analysis

See also:

Liabilities

The Current Ratio

Translating the Financial Statements of a Foreign Subsidiary in a Hyperinflationary Economy

Pre-tax income

Benchmarking a Bond Portfolio