Solvency and liquidity differ in a company's ability
A)to show a profit.
B)to remain in business over a long or short period of time.
C)to collect cash from customers during the short or long term.
D)to increase gross profit percentages over long or short periods of time.

Question

Quizplus · Accepted Answer

Solvency refers to a company's ability to meet its long-term debt obligations, while liquidity refers to a company's ability to meet its short-term debt obligations and operational expenses. Therefore, solvency and liquidity both deal with a company's ability to remain in business over a long or short period of time.

Solvency and Liquidity Differ in a Company's Ability