What is the creditor’s equity or simply liability?

Expert Solution

Meaning of creditors: Creditor is the one who owes money from a company , individual, firm or any other. Creditors can be individual,firm, company LLP etc. Creditors in the balance sheet does mean that payables to creditors is still pending.

Creditors'equity : it does mean that the liability of a company. The liability of a company does occur due to loans and financial services taken from financial institutions , banking company or any other to whom we owe money and which should be paid within certain period of time alloted.

Creditors'equity ratio can be found out by dividing total liabilities of a company by its total assets . The high ratio means that the company is unable to earn or invest to increase it's assets.

The low ratio means that company is capable of investing and earning from the money of creditors which is financed on assets.

Creditors'equity on balance sheet can be as follows: long term loan , short term loan, unsecured loans, secured loans etc.

ekkarill92 answered 1 year ago

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