Liabilities are financial obligations a company or individual owes to others, including loans, accounts payable, and mortgages. Managing liabilities is crucial for maintaining financial stability as it ensures that obligations are met in a timely manner, prevents the accumulation of excessive debt, and helps maintain a good credit rating. Effective liability management also allows for better cash flow management, aids in strategic planning, and can improve overall financial health by minimising the cost of borrowing and optimising the capital structure.