Which of the following best defines a 'liability'?

A liability is best defined as a financial obligation owed to another party. This encompasses various forms of debt or commitments that an individual or organization may have. For instance, this can include loans, mortgages, credit card debt, or any other kind of borrowing where repayment is required. Understanding liabilities is crucial for managing finances effectively, as they represent how much one owes and the commitments that must be fulfilled in the future. This concept is foundational in personal and business finance, influencing budgeting, credit decisions, and overall financial health.