MASTERCLASS Investment – Difference between Debt and Liabilities

MASTERCLASS Investment – Difference between Debt and Liabilities

Investment – Difference between Debt and Liabilities

Investors can sometimes mention liability or debt when they mean the same thing.

However more precise –

  • debt refers to borrowed money
  • liabilities to an obligation of any kind, such as loans, tax or employee super

But when using and comparing company financial ratios – there is a difference between Debt & Liability and one needs to know which is used in the ratio to understand it’s meaning.

For example in the debt-to-equity ratio, debt means the total amount of liabilities both short term (less than 12 months), and long term (over 12 months). This means, debt includes short-term accounts such as overdrafts and credit cards and normally also includes accrued wages and utilities, income taxes due and other liabilities, plus long-term accounts like long-term loans and bonds payable. 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.
As always, keep these in mind to know WHAT is being used – be clear and have it defined!

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Self-Managed Superannuation Service Providers in Australia. SuperBenefit provides a wholistic SMSF assistance, education and administration service continuum - 1. “assistance” is help of whatsoever nature where our overall SMSF experience and knowledge enables us to provide assistance/help without any legal (or “license”) limitations. 2. “education” involves providing knowledge through teaching, coaching and mentoring about all matters SMSF, including (but not limited to) investment issues such as equities and property, 3. “administration” encompasses all admin aspects of legally required SMSF trustee and member record keeping including (but not limited to) audit and ATO matters. In keeping with our key point that SuperBenefit does not provide Financial Advice, where issues arise from 1, 2, and/or 3 above Indicate a need for a legally authorized provider (such as a Financial Adviser) and the client does not have their own service provider, the client can utilize SuperBenefit’s ‘Connect Assist’ … SuperBenefit, in itself, does not provide Financial Advice, but it does provide the wherewithal for great SMSF service. WE do not provide Financial Advice or any other service that requires a legally authorized provider. However, where such advice or service is required we have our ‘Connect Assist’, a SuperBenefit resource we use to connect clients to a Licensed Advisor or other legally authorised service provider. Call us 0407 361 596, no obligation FREE Connection call to see how we can help you!
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