Certified Fraud Examiner Practice 2025 - Free Practice Questions and Study Guide

An increase in liabilities typically indicates that a company has taken on additional financial obligations or debts. Liabilities represent what the company owes to others, and when liabilities increase, it often means the entity has borrowed money or has incurred more obligations, contributing to greater total debt.

For instance, if a business decides to finance its operations through a bank loan, its liabilities will rise as it records the loan amount as a liability. This is a standard accounting practice where the balance sheet reflects the obligations that a company has, highlighting its financial structure and debt levels.

The other options do not accurately describe the immediate consequences of increasing liabilities. For example, increased liabilities do not directly lead to an increase in owner's equity; rather, it can affect equity indirectly based on how those liabilities are managed. Similarly, while an increase in liability might support business growth leading potentially to revenue increases in the long term, it does not guarantee immediate revenue growth. Lastly, increased liabilities do not inherently mean an increase in asset values as the assets would need to be evaluated based on their performance and not just the presence of more debt.