The ability to pay bills when due and to meet unexpected needs for cash most closely describes
A)cash flow adequacy.
B)long-term solvency.
C)liquidity.
D)profitability.

Question

Quizplus · Accepted Answer

The term "liquidity" refers to the ability of an individual or organization to quickly access cash or assets that can be easily converted into cash to meet financial obligations when due. Therefore, the ability to pay bills on time and meet unexpected cash needs is a sign of good liquidity. A and D are not as accurate because "cash flow adequacy" and "profitability" do not necessarily indicate one's ability to meet financial obligations. Long-term solvency, on the other hand, refers to the ability to meet long-term financial obligations and is not directly related to short-term liquidity.

The Ability to Pay Bills When Due and to Meet