The Ability of a Business to Pay Its Debts as They

question 203

Multiple Choice

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

• A) solvency and leverage
• B) solvency and profitability
• C) solvency and liquidity
• D) solvency and equity

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Definitions:

Defective Product

A consumer item that is not safe for its intended use due to design, manufacturing, or labeling issues, potentially leading to liability for damages.

Industrywide Liability

A legal theory holding all companies within an industry responsible for harm caused by hazardous products or practices, regardless of individual culpability.

Manufacturing

The process of converting raw materials, components, or parts into finished goods through the use of equipment, human labor, and machinery.

Harmful Product

A product that can cause injury, health issues, or detrimental effects to consumers due to its nature, design, or manufacturing.