What term refers to a business's responsibility for repaying debt?

The term that refers to a business's responsibility for repaying debt is liability. In business accounting, liabilities are defined as any legal financial debts or obligations that a company needs to settle, typically involving money owed to creditors or lenders. These can include loans, accounts payable, mortgages, and other forms of debt that the business is obligated to pay back in the future.

Liabilities are a critical aspect of a company’s balance sheet, representing claims against its assets. Understanding liabilities is essential for assessing the financial health of a business, as they indicate the degree to which a company is leveraged and also affect its creditworthiness and operational capabilities.

The other terms do not accurately describe this specific concept. Assets are resources owned by the business, often contributing to revenue generation. Equity represents the ownership interest in the business after all liabilities have been deducted from assets. Obligation is a broader term that can refer to duties or responsibilities in various contexts, not just repaying debts. Thus, liability is the clear and correct term used in this context.