The firm's ability to convert an asset to cash or to pay a current liability change is the definition of
A) Liquidity
B) Solvency
C) Financial flexibility
D) Working capital

Question

Quizplus · Accepted Answer

Liquidity refers to the ability of a firm to convert its assets to cash quickly to meet its current obligations. Solvency refers to the ability of a firm to meet its long-term obligations. Financial flexibility refers to a firm's ability to adjust its financial position in response to changes in its operating environment. Working capital is the difference between a firm's current assets and current liabilities, and is a measure of its short-term liquidity.

The Firm's Ability to Convert an Asset to Cash or to Pay