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11 November, 14:45

Can a business be profitable but not solvent? Explain.

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  1. 11 November, 15:55
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    Solvency and profitability are two distinct yet interdependent aspects of a company’s financial health. A solvent company has assets that exceed its liabilities sufficiently to provide for reinvestment in the company’s growth. The standard for profitability requires that income derived from the company’s business activities exceeds the company’s expenses. While a company can be solvent and not profitable, it cannot be profitable without solvency.
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