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Solvency is the ability of a business to (A) maximise its profits - HSC - SSCE Business Studies - Question 4 - 2016 - Paper 1
Question 4
Solvency is the ability of a business to (A) maximise its profits. (B) increase its market share. (C) meet its long-term financial commitments. (D) meet its shor... show full transcript
Worked Solution & Example Answer:Solvency is the ability of a business to (A) maximise its profits - HSC - SSCE Business Studies - Question 4 - 2016 - Paper 1
Step 1
C) meet its long-term financial commitments.
Answer
Solvency refers specifically to a business's ability to meet its long-term financial commitments. It indicates the financial stability of a business and its capability to fulfill obligations that extend beyond the short term. In contrast, options (A) and (B) deal with business growth and performance metrics, which do not accurately define solvency.