Alberta General Insurance Level 1 Practice Exam

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What indicates a business's ability to meet its long-term financial commitments?

  1. Profitability

  2. Market share

  3. Solvency

  4. Revenue growth

The correct answer is: Solvency

Solvency is a measure of a company's financial health and ability to meet its long-term financial commitments. It takes into account the company's assets, liabilities, and overall financial structure. A company may have high profitability or market share, but that does not necessarily mean it has enough financial resources to sustain its operations in the long run. Revenue growth, while important, is also not an indication of a company's ability to meet its long-term financial commitments. Therefore, solvency is the best answer as it specifically measures a company's financial stability and capability.

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