Liquidity differs from leverage in that liquidity is the:
A) ability to operate at minimum cost.
B) ability to use resources efficiently.
C) ability to generate cash to pay bills.
D) ability to earn more in returns than the cost of debt.
E) ability to earn revenues greater than costs.

Question

Quizplus · Accepted Answer

Liquidity refers to the ability of a company to generate cash to pay bills, cover expenses, and meet short-term financial obligations. Leverage, on the other hand, refers to the use of debt financing to increase the potential return on investment. The other options listed do not accurately describe liquidity.

Liquidity Differs from Leverage in That Liquidity Is The