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If a company is considered "very liquid" or "highly solvent" for the year, this means it:...

If a company is considered "very liquid" or "highly solvent" for the year, this means it:

Must sell off its major fixed assets in order to stay in business.
Has an extremely low acid test (quick) ratio.
Is able to pay its current debts as they come due using its current assets.
Has a current ratio that is less than one.
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Answer #1

The Correct Answer is Is able to pay its current debts as they come due using its current assets.

Very liquid" or "Highly solvent for a company means that the company will be able to pay for its current obligations when they fall due. When a company is highly solvent then its Current Ratio is more than 1 which signifies that the company has ample resources to meet its short term liabilities. This would also mean that its acid test ratio is high.

Being Highly solvent would also mean that financial position of the company is sound and performing well.

Therefore it can be concluded that If a company is considered "very liquid" or "highly solvent" for the year, this means it Is able to pay its current debts as they come due using its current assets.

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