What do Liabilities represent in a business?

Liabilities represent debts that are owed by the company to external parties. This can include loans, accounts payable, mortgages, and any other obligations that require the company to pay money or transfer assets to settle. Understanding liabilities is crucial for evaluating a company's financial health, as they indicate the extent of the financial obligations the company has and play an essential role in determining net worth alongside assets and equity.

In contrast, the other choices represent different financial concepts. Investments in the company relate to the capital put in by shareholders or owners, which is reflected in equity, not liabilities. Revenue generated from sales indicates the income earned by the company through its operations, not debts owed. Profit that remains after expenses are deducted is known as net income, which reflects the company's earnings rather than liabilities. Therefore, recognizing that liabilities are specifically the debts owed offers clarity on a business's financial position.