The ability of a business to manage its assets and liabilities is known as

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When evaluating what term describes a business's ability to manage its assets and liabilities, we need to recall standard financial concepts.
Option a: profitability. This refers to how much profit a company earns relative to revenue or assets, not specifically to the balance between assets and liabilities, so it does not capture the management of working capital or liquidity.
Option b: efficiency. This is about how well a company uses its resources to generate output, often measured by asset turnover or cost control, but it does not directly describe the capacity to meet short-term obligations or convert assets to cash quickly.
Option c: liquidity. Liquidity is the measure of how easily and quickly an entity can meet its short-term obligations using its most liquid assets. It directly reflects the ability to manage cash flow, accounts receivable, and current liabilities, aligning with the concept of managing assets and liabilities.
Option d: stability. This term generally refers to the steadiness of earnings or the overall risk profile over time, not the active ability to cover liabilities with liquid assets in the near term.

MUF0022 Accounting Unit 2 - Semester 2, 2025 Quiz: Performance Evaluation

The ability of a business to manage its assets and liabilities is known as

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