liability

Vocabulary Word

Definition

In simple terms, a 'liability' is a responsibility or obligation. Much like when you borrow money from a friend and you're responsible to pay it back, in business too, a liability reflects an amount that a business owes.

Examples in Different Contexts

In creative projects, an element or individual seen as a hindrance can be termed a 'liability'. A film producer might state, 'The unpredictable weather has become a liability for our shooting schedule.'

Practice Scenarios

Business

Scenario:

We need to work on our debt management strategy. The financial year's close calls for stringent measures.

Response:

Considering our liabilities and the lack of liquid assets, we may need to consider debt consolidation.

Accounting

Scenario:

Our financial ratios suggest a potential liquidity issue. Ensuring balance sheet stability should be our priority.

Response:

Our current liabilities are high relative to our assets. We should seek ways to improve our liquidity.