What term refers to the ability to meet financial obligations and pay off debts?

What term refers to the ability to meet financial obligations and pay off debts?

• A. Sanction
• B. Schism
• C. Solvent
• D. Severance

Answer: (C)

The term that refers to the ability to meet financial obligations and pay off debts is "solvent." When an individual or organization is solvent, it means that their total assets exceed their total liabilities, allowing them to fulfill their payment commitments without resorting to additional borrowing or facing insolvency. Solvency is a critical concept in finance as it indicates financial health and stability, ensuring that obligations can be met as they come due. In contrast, other terms like sanction, schism, and severance do not relate to financial obligations. A sanction generally refers to a penalty or punitive measure, a schism denotes a division or split, often in social or religious contexts, and severance usually pertains to the termination of employment and the benefits associated with it. Thus, "solvent" is the correct term in this context.

The term that refers to the ability to meet financial obligations and pay off debts is "solvent." When an individual or organization is solvent, it means that their total assets exceed their total liabilities, allowing them to fulfill their payment commitments without resorting to additional borrowing or facing insolvency. Solvency is a critical concept in finance as it indicates financial health and stability, ensuring that obligations can be met as they come due.

In contrast, other terms like sanction, schism, and severance do not relate to financial obligations. A sanction generally refers to a penalty or punitive measure, a schism denotes a division or split, often in social or religious contexts, and severance usually pertains to the termination of employment and the benefits associated with it. Thus, "solvent" is the correct term in this context.