Home › US CMA Part 2 › Finance › Financial Ratio Analysis › Solvency is described as implying that a company…
Solvency is described as implying that a company can meet its obligations that are:
ALong-term
BShort-term
COverdue now
DAlready paid
Answer & Solution
Correct answer: A. Long-term
1. Solvency and liquidity concern different time horizons.
2. Solvency is one of the four main ratio types.
3. Solvency implies that a company can meet its long-term obligations.
4. It will likely stay in business in the future.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 6 'Measures of Financial Health'_
Related questions
Comparing a firm's ratios against rivals in the same sector uses which stated purpose of rA current ratio below one means current liabilities exceed:Inventory turnover and days' sales in inventory both belong to which ratio family?A firm that can pay next month's bills but not its ten-year debt is strong in which respecA company with current assets of 500 and current liabilities of 250 has a current ratio ofRatio analysis is also described as being used to compare industry:Alongside examining trends, ratio analysis can establish benchmarks for:Ratio analysis information can be used to examine trends in: