The firm's ability to use its financial resources to adapt to change is the definition of
A)Liquidity
B) Solvency
C) Financial flexibility
D) Working capital

Question

The firm's ability to use its financial resources to adapt to change is the definition of 
A)Liquidity
B) Solvency
C) Financial flexibility
D) Working capital

Quizplus · Accepted Answer

Financial flexibility refers to the ability of a firm to utilize its financial resources to adapt to changes or unexpected events. This means that the firm has the ability to adjust its operations, investment decisions, and financing strategies in response to changing market conditions or unforeseen events. It is different from liquidity and solvency, which focus on a firm's ability to meet its short-term and long-term financial obligations, respectively. Working capital is a measure of the firm's current assets and liabilities and does not capture the firm's ability to adapt to change.

The Firm's Ability to Use Its Financial Resources to Adapt