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Business Financials – Liabilities and Debt - Difference?
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Published on Friday, 08 March 2024 10:19
What is the difference between the terms liabilities and debt?
At times people use liabilities or debt when they mean the same thing.
For an example, in the debt-to-equity ratio, debt usually means the total amount of liabilities. In this case, debt includes short-term such as overdrafts and credit cards plus long-term loans, bonds payable and normally also includes accrued (yet to be paid) wages and utilities, income taxes due and other liabilities.
In other words, sometimes debt means all obligations…all amounts owed…all liabilities.
However, other times, the word debt is used more narrowly to mean only the formal, written financing contracts such as short-term loans payable, long-term loans payable and bonds payable – example, hire-purchase, equipment finance, etc.
So look further, to know WHAT is being used – be clear!
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