New York State Property and Casualty Licensing Practice Exam

When a company is described as being able to meet its financial obligations, it is referred to as "solvent." This term signifies that the company has sufficient assets and cash flow to cover its debts and other liabilities as they come due. A solvent company is financially stable and capable of continuing its operations without the risk of defaulting on its obligations.

In contrast, the other terms have specific meanings that do not align with the concept of meeting financial obligations. For example, "insolvent" describes a company that cannot meet its debts when they are due, indicating financial distress. "Bankrupt" refers to a legal state in which a company has declared inability to repay debts, often leading to legal proceedings. "Profitable" indicates that a company is generating more income than expenses, but it does not necessarily reflect its ability to meet obligations if liabilities exceed assets. Therefore, "solvent" is the only term accurately reflecting a company's capability to fulfill its financial responsibilities.