Association of Chartered Certified Accountants (ACCA) Certification Practice Test

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the ACCA Certification Exam with interactive quizzes and detailed explanations. Get a head start on your success with our comprehensive study tools.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What happens if a business is deemed solvent?

The company cannot file for winding up
The company must declare bankruptcy
The company can voluntarily dissolve itself
The company may continue operations indefinitely

The correct answer is: The company may continue operations indefinitely

When a business is deemed solvent, it means that it is able to pay its debts as they come due and has more assets than liabilities. This financial health allows the company to continue its operations indefinitely, as long as it maintains its solvency. Solvent companies have the flexibility to engage in various activities such as investments, expansions, or restructuring as they see fit without the immediate risk of bankruptcy or winding up. Other options are not applicable in this context. A solvent company can indeed consider voluntary dissolution if it chooses to cease operations for strategic reasons, but it is not obligated to do so. Additionally, declaring bankruptcy is only a route for companies facing insolvency, and if a company is solvent, it cannot file for winding up under normal circumstances since it is financially capable of covering its obligations. Therefore, the key takeaway is that being solvent supports the continuation of business operations and provides a stable environment for growth and planning.