Which of the Following Best Describes Liquidity

question 58

Multiple Choice

Which of the following best describes liquidity?

• A)The ability to increase the value of retained earnings.
• B)The ability to pay the debts of the company as they become due.
• C)Being able to buy everything the company requires for cash.
• D)Purchasing everything the company requires on credit.

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been deducted from total revenue, indicating the company's profit.

Year 1

A term typically used to refer to the first year of an activity, study, or business operation.

Liquidity Ratios

Financial metrics used to evaluate a company's ability to meet its short-term obligations, indicating its financial health.

Short-Term Debt

Financial obligations and loans that are due to be paid back within a year from the balance sheet date.