Liabilities

Expanded Explanation: Liabilities represent what a company owes to others—debts and obligations that arise during the course of business operations. Effective liability management is crucial for maintaining a company’s liquidity and solvency.

Potential Issues: Underestimating liabilities can lead to unexpected financial strain and impact the company’s ability to acquire financing or meet its financial obligations.

Example: The loan you took to start your small gym is a liability until it’s fully repaid.