Which term describes a financial obligation for which a person is responsible?

The term that describes a financial obligation for which a person is responsible is liability. In financial terms, a liability refers to any legal or financial obligation that an individual or company owes to others. This could include debts like loans, mortgages, or credit card balances, which must be settled over time through transfers of economic benefits, such as money, goods, or services.

Understanding the role of liabilities is crucial in assessing the financial health of an individual or organization, as they represent claims against future assets. Proper management of liabilities is also essential in maintaining financial stability and creating a balanced financial portfolio.

In contrast, assets represent what an individual or business owns, equity relates to ownership interest in a property or business after liabilities are subtracted from assets, and investments are assets acquired with the expectation of generating returns. These concepts are interconnected but serve distinct purposes in financial accounting and personal finance management.