Based on a company's financial statement, how does liquidity, solvency and profitability make the company look...

Based on a company's financial statement, how does liquidity, solvency and profitability make the company look favorable?

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Expert Solution

Solvency tells about how the ability of the company to meet its long term financial commitments. So if the company is able to meet its commitments in the long term then it surely stands out.

Liquidity refers to the ability of the company to meets its short term financial obligations. SO if the company is able to meet its obligations of short term then it makes it better for the short term.

Profitability is the ability to earn the profit by the company. Higher the profit, the better it is for all the stakeholders.

Hence, these three are the parameters to measure the holistic success of an organization.

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