In business terms, liability refers to

• A. The total revenue of the business
• B. Legal responsibility
• C. The market share
• D. Tax obligations

Answer: (B)

Liability in business terms means a legal responsibility or obligation the business has toward others. It covers debts and other commitments the company must fulfill, such as loans, amounts owed to suppliers, or obligations under contracts and warranties. These obligations require the business to part with resources in the future, so they appear on the balance sheet as what the company owes. This is different from total revenue, which is income earned, and from market share, which is a measure of the business’s portion of the market. Taxes owed are a type of liability, but the broader idea being tested here is the legal responsibility the business has toward others.