How is a company's total debt calculated?

A company's total debt is calculated by summing short-term and long-term debt obligations. This method accurately reflects the entirety of a company's financial obligations that require repayment over time. Short-term debt includes liabilities that are due within one year, such as bank loans and lines of credit. Long-term debt encompasses any liabilities that extend beyond one year, such as bonds payable and long-term loans.

This comprehensive approach provides insight into the company’s overall indebtedness, which is crucial for evaluating its financial leverage and risk profile. Understanding total debt is essential for financial analysts and investors, as it directly impacts a company's capital structure and can influence decisions regarding equity and financial planning.

The other options do not represent a holistic or correct approach to calculating total debt. For instance, summing cash and cash equivalents focuses solely on liquidity rather than liabilities. Calculating accounts payable and accrued liabilities pertains to operational obligations rather than total debt. Lastly, assessing equity and retained earnings relates to ownership and profitability rather than a company’s liabilities. Therefore, understanding the proper calculation of total debt is integral for effective financial analysis.