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FSOT Full Test Bank

Category - Management

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Which of the following best measures a company’s ability to meet short-term obligations?

Liquidity
Profitability
Productivity
Leverage

Explanation

Answer: A - A company’s ability to meet short-term obligations is best measured by its liquidity. Liquidity measures a company’s cash on hand and assets that can be quickly converted to cash at or near full value. Profitable companies with many assets that lack liquidity can usually finance short-term obligations with other loans.

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