Operating liability
AccountingA liability that arises from running the business rather than from financing it, such as payables or accruals.
Operating liabilities are the claims the business creates simply by trading: amounts owed to suppliers, wages earned but not yet paid, tax accrued, warranty provisions. They are not borrowings, nobody negotiated them as financing, and they carry no interest.
That is why they are treated completely differently from debt. Debt is added in the bridge from equity value to enterprise value, because a buyer must repay it. Operating liabilities are not, because they are already embedded in working capital and therefore already reflected in the operating cash flows being valued.
Adding payables to net debt is a classic and expensive error. It double counts, because the benefit of supplier credit is already in the cash flow forecast, and it makes the company look far more levered than it is.
The boundary can be genuinely arguable. Pension deficits, deferred consideration and long dated provisions all sit near the line, and how they are treated in a bridge is often negotiated in a transaction rather than settled by accounting rules.
Worked example
A company has 120 of trade payables and 300 of bank debt.
Only the 300 is added in the bridge from equity value to enterprise value. The payables are already inside working capital and therefore already reflected in the operating cash flows being valued.
Adding the payables too would double count them and make the company look 40% more levered than it is.