What does “liability” mean in economics?

In economics, "liability" refers to legal obligations for debts or damages that a company or individual is responsible for. This concept plays a crucial role in understanding a business’s financial health, as it represents claims against its assets. Liabilities can include loans, unpaid bills, and other financial obligations that must be settled in the future. Understanding liabilities is essential for evaluating the risk and stability of a business, as they can impact cash flow and influence decisions made by investors and creditors.

The other choices do not accurately define "liability." Assets owned by a company pertain to its resources, while profit generated from investments relates to income rather than obligations. The market value of goods sold refers to revenue and does not encompass the concept of liabilities, which are focused on obligations rather than assets or income.