The ability of a business to meet its debts as they fall due is known as

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BlackTom AI · Accepted Answer

The question asks about the term for a business’s ability to meet its debts as they fall due.
Option a: efficiency. This term typically refers to how well a company uses its resources to generate output, not specifically its ability to pay debts as they come due. So this is not the right descriptor for liquidity.
Option b: profitability. Profitability measures how much profit a company makes over a period, usually focusing on revenues minus costs. It does not directly describe the ability to meet short-term obligations, which is a liquidity concept.
Option c: liquidity. Liquidity is the capacity of a business to cover its short-term liabilities with its liquid assets or inflows when debts come due. This directly matches the definition in the question.
Option d: stability. Stability refers to a company’s overall soundness and risk profile over time, including long-term viability, but it is not the specific term for meeting debts as they fall due in the short term.

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

The ability of a business to meet its debts as they fall due is known as

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