In financial terms, liabilities are:

Liabilities are defined as obligations that a business owes to external parties, typically creditors. These obligations can arise from borrowing funds, purchasing goods or services on credit, or any other form of financial indebtedness. When a business takes on a liability, it creates a legal requirement to pay back what it owes, usually with interest, over a specified period. This definition aligns with the correct choice, highlighting that liabilities represent financial responsibilities rather than assets, future income, or equity components. Understanding liabilities is crucial for assessing a company’s financial health, as they reflect the resources that must be settled in the future, impacting cash flow and overall financial stability.