5 Questions
What is the concept that refers to the ability of a business to repay its debts?
Solvency
What is the primary goal of business according to Chapter 1?
Maximizing shareholder wealth
In the context of Chapter 1, what does the term 'liquidity' refer to in business?
The ability of a business to repay its debts
According to Chapter 1, what is the significance of 'solvency' for a business?
The ability of a business to meet long-term financial obligations
In the context of Chapter 1, what is the primary focus of 'profitability' for a business?
The ability of a business to maximize shareholder wealth
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.
Test your understanding of Chapter 1 in business studies with questions about the primary goal of business, external stakeholders, debt repayment, and economies of scale.
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