Alberta General Insurance Level 1 Practice Exam

Question: 1 / 400

What does solvency refer to in a business context?

A business's ability to meet long-term financial commitments

Solvency refers to a business's ability to meet long-term financial commitments, such as paying off debts and long-term loans. This is different from short-term liquidity (choice B), which refers to a company's ability to meet immediate financial obligations. Choice C, the company's stock market performance, also does not accurately describe solvency as it is not the only factor that contributes to a business's financial stability. Choice D, a company's gross profit margin, is an indicator of profitability and does not directly relate to solvency. Therefore, A is the most accurate choice as it specifically refers to a business's long-term financial stability.

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The short-term liquidity of a company

The company's stock market performance

A company's gross profit margin

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