alleryStart learning →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'_
Keep practising Financial Ratio Analysis
Browse all Financial Ratio Analysis questions for US CMA Part 2, or explore more Finance topics.
Related questions
Match each ratio familySet the current ratioJudge the assertion and the reasonSort the ratio familiesBuild the working capital figureComparing 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?