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Liabilities - Definition
Below, you'll find a definition of this investing term...

Definition: A financial obligation that a business is required to pay.  These include bonds, notes, accounts payable, etc.

TeenAnalyst Advice: When a company owes somebody, it's called a liability.  These liabilities are recorded on the balance sheet.  Net worth is figured as assets - liabilities.  Therefore, liabilities take away from net worth.

Liabilities aren't bad, though.  Liabilities mean that the company could be growing.  And if a company takes out an 8% loan to create a project that will earn them a 15% return on their investment, it's considered a good liability.

 

Related Sections on Our Website

Investing - Learn more about investing basics and strategies.

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