Liability in investment refers to an investor or organisation’s financial obligations or debts. They can be short-term or long-term. Some examples of liabilities are accounts payable, expenses, bonds, loans, and other obligations. In the context of trading, liabilities may also refer to the money a trader borrows to invest in securities, or if they have entered into financial contracts that require them to make future payments.
In stock trading, liability is an important component traders can refer to when they analyse a company’s financial health and creditworthiness. They can find this information in a company’s financial statement to assess its ability to pay off its debts and generate sufficient cash flow.
Traders can also use liability information to calculate a company’s debt-to-equity ratio, which is an important financial ratio that measures a company’s leverage. A high debt-to-equity ratio may indicate a company has a high probability of defaulting on its loans, which can warn traders to steer clear of purchasing its stock.
ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.