When Might You Be Liable for Another's Contractual Obligations on the Acquisition

question 6

Multiple Choice

When might you be liable for another's contractual obligations on the acquisition of property?

• A) If the property is land, and you are aware that it is subject to a negative covenant restricting its use.
• B) If the property is a chattel, and you are aware that it is subject to a negative covenant restricting its use..
• C) Both options are correct.
• D) Neither options are correct.

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Definitions:

Current Ratio

A liquidity measure that evaluates a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Fixed Asset Turnover

A financial ratio that measures a company’s ability to generate sales from its fixed-asset investments - such as property, plant, and equipment.

Current Ratio

A financial ratio assessing a firm's capacity to fulfill its short-term liabilities using its current assets.

Short-Term Liquidity

An indicator of a company's ability to meet its short-term financial obligations using assets that can be quickly converted into cash.