Home › Finance › Debt, Loans & Bankruptcy › liability

liability

ly-uh-BIL-uh-tee /ˌlaɪəˈbɪləti/

nounC1GREGMAT

formalfinancelegal

The state of being responsible for something, especially by law; a thing for which someone is responsible, especially a debt or financial obligation.

In finance, 'liability' refers to financial obligations or debts owed to others. In a broader sense, it can mean a legal responsibility or even a disadvantage. It's the opposite of an asset.

The story behind the word. The word 'liability' comes from the Old French 'lier,' meaning 'to bind,' which itself is from the Latin 'ligare,' also meaning 'to bind.' The suffix '-ability' indicates the capacity or state of being. So, 'liability' literally means the 'state of being bound' or 'responsible' for something, especially a debt or legal obligation.

Word relationships

debt: A sum of money owed; 'liability' is broader, encompassing legal responsibilities and other obligations.
obligation: A duty or commitment; 'liability' often implies a legal or financial obligation.
indebtedness: The state of owing money.

asset: Something owned that has value.
advantage: A condition or circumstance that puts one in a favorable position.

Commonly confused with

debt: 'Debt' is a specific sum of money owed; 'liability' is a broader term for any financial or legal obligation.

Word family

liable (adjective): Responsible by law; subject to something unwelcome or unpleasant.

Collocations

financial liability
legal liability
limited liability
product liability
tax liability

Idioms & expressions

a liability (a person or thing that causes a disadvantage)

Example sentences

"The company's balance sheet showed significant short-term liabilities, including accounts payable and accrued expenses." In accounting.
"The driver accepted full liability for the accident and its associated costs." Legal responsibility.
"Pension obligations represent a major long-term liability for many corporations." From a business report.

Memory hook

To have a 'liability' is to be 'liable' or 'bound' to an obligation. Bound by law

When not to use

While 'liability' can refer to a disadvantage, in a financial context, it specifically means a debt or obligation. Do not use it interchangeably with 'debt' if you need to emphasize legal responsibility beyond just owing money.

Fun facts

The legal concept of 'limited liability' is crucial for corporations, protecting shareholders from personal responsibility for the company's debts.