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A business ensures all its debts are paid as they fall due - HSC - SSCE Business Studies - Question 4 - 2017 - Paper 1
Question 4
A business ensures all its debts are paid as they fall due. Which financial objective is the business satisfying? A. Efficiency B. Growth C. Liquidity D. Solvency
Worked Solution & Example Answer:A business ensures all its debts are paid as they fall due - HSC - SSCE Business Studies - Question 4 - 2017 - Paper 1
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Evaluate each option in relation to the business's action
Answer
The action of the business is to ensure all debts are paid as they fall due.
- Efficiency: This relates to minimizing costs and maximizing outputs, not specifically about meeting payments.
- Growth: This objective focuses on expanding the business and increasing profits, which is not the concern here.
- Liquidity: This is a measure of the business's ability to meet short-term obligations and pay debts as they come due.
- Solvency: This refers to a company's ability to meet long-term obligations, but in this context, paying debts as they fall due aligns more with liquidity.
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