What is the term used to refer to debts that a business owes?

The term used to refer to debts that a business owes is "liabilities." In accounting, liabilities represent obligations that the company has to outside parties, which can include loans, accounts payable, mortgages, and other forms of debt. Essentially, liabilities are the financial commitments that require future sacrifices of economic benefits, typically in the form of cash.

Understanding this term is crucial for managing a business's financial health. Liabilities are a key component in the balance sheet, which provides a snapshot of a company's financial position at a particular point in time. They help assess the company's leverage and overall financial stability. Keeping track of liabilities is essential for businesses to ensure they can meet their financial obligations while also planning for future growth and investments.

In contrast, the other terms listed—assets, owner's equity, and fixed assets—represent different financial concepts. Assets refer to what the business owns, owner's equity represents the owner's claim on the assets after liabilities are deducted, and fixed assets are long-term tangible assets used in the production of goods and services that are not expected to be converted to cash within a year. Understanding these definitions provides a comprehensive view of a business's financial situation.