Financial statement users assess a business' liquidity and solvency to see whether a business is generating enough cash to pay its debts.

Question

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Liquidity refers to the ability of a business to meet its short-term obligations, while solvency refers to its ability to meet long-term debts. Assessing both helps users understand if a business can generate enough cash to pay its debts.

Financial Statement Users Assess a Business' Liquidity and Solvency to See