Definition

Total liabilities on a balance sheet are the aggregated debts that a company owes. Total liabilities include a company's short-term & long-term-debts, along with any other outstanding liabilities.

Why it is important

Total liabilities are important to know in order to calculate metrics that relate to a company's operational efficiency. Ratios that use liabilities in the calculation are debt to equity ratio, shareholder equity, and debt to assets.