In financial terms, a liability refers to any obligation or debt that an individual or entity owes to others. It encompasses financial responsibilities such as loans, mortgages, and outstanding bills.
Liabilities are crucial components of balance sheets, representing the claims against an entity’s assets. They can be classified as current or long-term, depending on their maturity.
Effectively managing liabilities is essential for maintaining financial health and stability, as they represent the financial commitments and obligations that an individual or organization must fulfill over time.
