Question

The term financial position is closely related to the term liquidity while financial condition is much broader in scope, including

not only financial position but also consideration of long-term solvency.
A. True.
B. False.

Answer 1

The statement is True; financial position pertains to liquidity, whereas financial condition is broader and includes long-term solvency as well.

Step-by-step explanation:

The statement that the term financial position is closely related to liquidity, whereas financial condition is broader in scope, encompassing not only financial position but also long-term solvency, is True. Financial position often refers to the liquidity of a company—how easily assets can be converted into cash to pay short-term obligations. In contrast, financial condition includes a more comprehensive view, taking into account both the short-term liquidity and the long-term financial stability of the entity, which involves assessing the long-term solvency or ability to meet long-term obligations.