The ability to convert assets into cash is called .
A)Solvency
B)Profitability
C)Working capital
D)Liquidity

Question

Quizplus · Accepted Answer

Liquidity is the ability of an entity to efficiently and effectively convert assets into cash or cash equivalents without significantly affecting its overall financial position. Having a high level of liquidity indicates that an organization is able to meet its short-term obligations and financial emergencies. The other options, solvency and profitability, refer to long-term financial stability and earning potential, respectively, and are not necessarily linked to an entity's ability to convert assets into cash. Working capital, while important for liquidity, only refers to a company's current assets minus its current liabilities.

The Ability to Convert Assets into Cash Is Called