Liquidity Refers to the Ability of a Company to Generate

question 105

True/False

Liquidity refers to the ability of a company to generate sufficient cash flows to maintain its productive capacity and still meet interest and principal payments on long-term debt.

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Definitions:

After-Tax Income

The amount of money an individual or company retains after all federal, state, and withholding taxes have been deducted from taxable income.

Payback Period

The time it takes for an investment to generate an amount of income or cash flow to recover the cost of the investment, indicating the investment's risk and liquidity.

Annual Cash Inflows

The total amount of money received by a company or individual in a year from various sources, excluding borrowings.

Straight-Line Depreciation

A way to distribute the outlay of a tangible resource over its service life in regular annual contributions.