📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!


    Question

    Which of the following strengthens a company's solvency

    position?
    A Increasing short-term borrowings only Correct Answer Incorrect Answer
    B Reducing long-term debt and increasing retained earnings (equity) Correct Answer Incorrect Answer
    C Increasing inventory levels drastically Correct Answer Incorrect Answer
    D Paying dividends financed by debt Correct Answer Incorrect Answer

    Solution

    Solvency refers to a company's long-term financial health and its ability to meet long-term obligations. Reducing debt and increasing equity improves the debt-to-equity ratio and strengthens the solvency position.

    Practice Next
    ask-question