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The most likely level of profit to be obtained by a business in the future is known as its: Group of answer choices solvency. profitability. liquidity. earning power.

Question

The most likely level of profit to be obtained by a business in the future is known as its: Group of answer choices

solvency.

profitability.

liquidity.

earning power.

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Solution

The most likely level of profit to be obtained by a business in the future is known as its earning power. This term refers to the predictive, or likely, profits that a business will generate.

Here's a step-by-step breakdown:

  1. Solvency: This refers to a company's ability to meet its long-term financial obligations. It's not directly related to future profits.

  2. Profitability: This is a measure of a company's ability to generate earnings compared to its costs and other expenses. It's a measure of current or past periods, not a prediction of future profits.

  3. Liquidity: This refers to how easily a company can convert its assets into cash to meet short-term obligations. It doesn't directly predict future profits.

  4. Earning power: This is the most likely level of profit a business can generate in the future. It's based on the historical earnings that have been adjusted for one-time events and other financial noise. This is the best answer to the question.

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