Total liabilities are the sum of all the financial obligations a company owes to outside parties. In simple terms, they are debts the company must pay. They can be found on the company's balance sheet and include items like loans, accounts payable, deferred revenue, and accrued expenses.
While the above definition provides a basic understanding, total liabilities deserve a more comprehensive explanation. Total liabilities are divided into two categories: current liabilities (debts due within one year) and long-term liabilities (debts due after one year).
Current liabilities include accounts payable, accrued liabilities, and short-term debt. Long-term liabilities include items like long-term debt, capital leases, and deferred tax liabilities.
Understanding a company's total liabilities is crucial as it provides insight into the company's financial health. A company with high total liabilities might face financial difficulties, especially if its liabilities exceed its assets.
For General Motors, total liabilities include short-term liabilities like accounts payable and accrued liabilities, and long-term liabilities like long-term debt and pension liabilities. They subtract these from their total assets to calculate their net assets.
Apple's total liabilities consist of current liabilities like trade payables and deferred revenue, and non-current liabilities like long-term debt and deferred tax liabilities. These are subtracted from total assets to determine the company's equity.
For Amazon, total liabilities include current liabilities like accounts payable and accrued expenses, and non-current liabilities like long-term debt and other long-term liabilities. These are subtracted from their total assets to calculate the company's net assets.