What term describes debts and obligations of a business?

The term that describes debts and obligations of a business is "liabilities." Liabilities represent the financial responsibilities that a company has to outside parties, such as loans, accounts payable, mortgages, and other obligations arising from past transactions or events. They are critical for understanding a company's financial health, as they indicate what the business owes and can affect decision-making and financial planning.

In contrast, assets are resources owned by a business that provide future economic benefits, such as cash, inventory, and property. Equity refers to the ownership interest in the company, representing the residual value after all liabilities have been deducted from assets. Income relates to revenue generated from business activities, which contributes to profitability but does not encompass obligations or debts. Thus, liabilities are distinctly characterized as the debts and obligations a business must manage.