Share
Explore BrainMass

Are all liabilities the same as it pertains to risk?

Are all liabilities the same as it pertains to risk? What means are there to compare the risk associated with various liabilities? Why would a firm use debt to support their financial needs rather than selling additional stock?

Solution Preview

Are all liabilities the same as it pertains to risk?

No, there is a great range of risk levels for liabilities. For instance, some liabilities are known, both the amount and the date payable, such as vendor invoices for inventory purchases. You know what is owed and when. Other liabilities are estimates for the amounts but you know the dates payable as in remediation for mining contract. You know when you have to restore the land but not the amount it will cost exactly. Some liabilities are estimates for both timing ...

Solution Summary

Your discussion is 337 words and indicates the criteria for sorting debt into risk levels and why debt may be preferred over added equity.

$2.19