External capital

What is external capital?

External capital consists of the obligations or debts that a business has. It is a part of the liabilities and therefore appears on the credit side of the balance sheet.

There is a distinction between short-term and long-term debts. Short-term debts, also known as current liabilities, must be paid within one year. Long-term debts, also referred to as non-current liabilities, are due for payment after one year.

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