The ability of a business to pay its debts as they come due and to earn a reasonable amount of...

Question:

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

a) solvency and leverage

b) solvency and profitability

c) solvency and liquidity

d) solvency and equity

Solvency

Solvency refers to the ability and capability to pay off debts on time.There are different ratios which are used to analyse the given capability of ones organisation and these ratios are known as financial or accounting ratios.

Answer and Explanation: 1

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The correct answer is option b) solvency and profitability


Explanation

Solvency : Capability to pay off debts

Leverage : To earn more using...

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What Is Profitability? - Definition & Analysis

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Chapter 1 / Lesson 22
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Learn about profitability. Understand what profitability is, learn what profit means and how economists measure profitability and see examples of profitability.


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