An enterprise's ability to pay its debts and related interest is called
A) liquidity.
B) financial flexibility.
C) the amount of time expected to pass until an asset is realized.
D) solvency.

Question

Quizplus · Accepted Answer

Solvency refers to an enterprise's ability to pay its debts and related interest. Liquidity refers to the availability of cash or easily convertible assets to meet short-term obligations. Financial flexibility refers to an enterprise's ability to adjust its financing and investment activities in response to changing business conditions. The amount of time expected to pass until an asset is realized refers to the asset's holding period.

An Enterprise's Ability to Pay Its Debts and Related Interest