Which term describes the ability of a corporation to meet its long-term financial commitments?

The term that describes the ability of a corporation to meet its long-term financial commitments is solvency. Solvency is a crucial concept in financial management, as it indicates whether a company has enough assets to cover its long-term liabilities. When a corporation is solvent, it can satisfy its obligations, which is a sign of financial health and stability.

In contrast, liquidity refers to a company’s ability to meet short-term obligations, not long-term ones. Profitability measures the company’s ability to generate earnings relative to its revenue, assets, or equity; while equity pertains to the ownership value in the firm that belongs to shareholders after all liabilities have been settled. These terms, while relevant to financial health, do not directly address long-term commitments in the same way that solvency does.