Spontaneous Liabilities

Spontaneous Liabilities

Obligations that arise automatically in the course of operating a business when a firm buys goods and services on credit.

Spontaneous Liabilities

Liabilities that a person or firm acquires when buying goods or services on credit. Specifically, spontaneous liabilities are the obligations to pay for the goods or services at some point in the future.
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Next, we introduce the concept of net working capital and spontaneous liabilities.
In NWC analysis one should consider the effects changes in operating assets will have on spontaneous liabilities such as accounts payable and hence, net working capital.
Figure 1 depicts the operating cycle we discussed in previous papers with the addition of spontaneous liabilities.
Managing operating assets to create value

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