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Questions and Answers
What is the concept that refers to the ability of a business to repay its debts?
What is the concept that refers to the ability of a business to repay its debts?
- Solvency (correct)
- Profitability
- Liquidity
- Efficiency
What is the primary goal of business according to Chapter 1?
What is the primary goal of business according to Chapter 1?
- Increasing employee turnover
- Reducing product quality
- Minimizing customer satisfaction
- Maximizing shareholder wealth (correct)
In the context of Chapter 1, what does the term 'liquidity' refer to in business?
In the context of Chapter 1, what does the term 'liquidity' refer to in business?
- The ability of a business to repay its debts (correct)
- The ability of a business to generate profits
- The ability of a business to expand its operations
- The ability of a business to attract new customers
According to Chapter 1, what is the significance of 'solvency' for a business?
According to Chapter 1, what is the significance of 'solvency' for a business?
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In the context of Chapter 1, what is the primary focus of 'profitability' for a business?
In the context of Chapter 1, what is the primary focus of 'profitability' for a business?
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Study Notes
Financial Health of a Business
- Solvency refers to a business's ability to repay its debts.
- The primary goal of a business is to maximize shareholder value.
- Liquidity refers to a business's ability to convert its assets into cash quickly and at a low cost.
- Solvency is significant for a business as it indicates the ability to meet long-term financial obligations.
- The primary focus of profitability is to earn a surplus of revenue over expenses, ensuring the business generates enough income to sustain itself.
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