Question : Which of the following statements is correct with respect to Creditors or Suppliers?
Option 1: Profitability of the firm in relation to investments.
Option 2: Short term solvency/liquidity of the concern.
Option 3: Effective utilization of its (firm's) resources.
Option 4: All of the above
Correct Answer: Short term solvency/liquidity of the concern.
Solution : Answer = Short-term solvency/liquidity of the concern.
Creditors or suppliers are primarily concerned about the short-term solvency or liquidity of a company. This is because they want assurance that the company will be able to meet its short-term obligations promptly. Profitability and effective resource utilization are important, but they are secondary considerations for creditors and suppliers. Hence, the correct option is 2.
