Which of the following best describes liquidity?
A)The ability to increase the value of retained earnings.
B)The ability to pay the debts of the company as they become due.
C)Being able to buy everything the company requires for cash.
D)Purchasing everything the company requires on credit.

Question

Quizplus · Accepted Answer

Liquidity refers to the company's ability to pay off its debts as they become due. Option A refers to the ability to increase retained earnings, which is related to profitability. Option C refers to the ability to make purchases, but does not necessarily relate to the ability to pay debts. Option D refers to purchasing on credit, which is not relevant to liquidity.

Which of the Following Best Describes Liquidity