Harvard Business Review Leadership & Strategy Boxed Set (5 Books)

12

On the Other Side

Liabilities and Equity

We said earlier that liabilities are what a company owes and equity is its net worth. There’s another—only slightly different—way to look at this side of the balance sheet, which is that it shows how the assets were obtained. If a company borrows funds in any way, shape, or form to obtain an asset, the borrowing is going to show up on one or another of the liabilities lines. If it sells stock to obtain an asset, that will be reflected on one of the lines under owners’ equity.

TYPES OF LIABILITIES

But first things first, which on this side of the balance sheet means liabilities, the financial obligations a company owes to other entities. Liabilities are always divided into two main categories. Current ...