Fundamentals of Business Intelligence (FBI) Practice Exam

What type of financial information would typically be found in liabilities?

1. Accounts Receivable

2. Long-term Debt

3. Retained Earnings

4. Investments

The correct answer is: Long-term Debt

In the context of financial information, liabilities represent obligations that a company owes to outside parties. This includes various forms of debt and financial responsibilities that will require future cash outflows. Long-term debt fits perfectly within this category as it includes loans and financial obligations that are due over a period longer than one year, reflecting a significant financial commitment that impacts the company’s overall financial health and cash flow management. Liabilities are essentially what the company owes, and understanding them is crucial for evaluating a business's financial stability and the risk associated with its financial strategy. Long-term debt can significantly affect investment decisions, risk assessment, and strategic planning for future growth. The other options refer to different aspects of a company's finances. Accounts receivable reflect the amounts owed to the company by customers for goods or services delivered, which is an asset rather than a liability. Retained earnings represent the cumulative profits that have been reinvested into the company and are part of shareholders’ equity. Investments are assets owned by the company that can generate income or appreciate in value. Thus, these other terms do not represent what the company owes, making long-term debt the correct type of financial information found under liabilities.