_______________refers to the ability of a firm to pay its debts as they fall due.

Question

Quizplus · Accepted Answer

Solvency refers to a company's ability to meet its financial obligations as they become due. It measures the degree to which a company's assets cover its liabilities, indicating whether or not the company can meet its debt obligations. The acid test and cash management are related to solvency, but they are specific measures used to assess a company's liquidity, which is just one aspect of solvency. Being in surplus is not specifically related to a company's ability to pay its debts, as a surplus can be used for other purposes such as reinvestment or distribution to shareholders.

_______________Refers to the Ability of a Firm to Pay Its