Having sufficient means to pay all debts or a firm's ability to pay all obligations if assets were liquidated is called

• A. Income
• B. Profitability
• C. Financial Efficiency
• D. Solvency

Answer: (D)

Solvency is the ability of a firm to meet all of its obligations, including what would be left if assets were liquidated. It reflects whether the total assets are sufficient to cover total liabilities, indicating long‑term financial health. This differs from liquidity, which focuses on short‑term cash flow, and from profitability or efficiency, which relate to earnings and how well resources are used.

Income is just money coming in, not a measure of debt-covering ability. Profitability describes earning more than costs, not the capacity to pay debts. Financial efficiency relates to how effectively assets are used, not whether debts can be fully covered. So, solvency best fits the described scenario.