Examination of a Company’s Performance

An examination of performance can include an assessment of a company’s profitability (the ability to earn a profit from delivering goods and services) and its ability to generate positive cash flows (cash receipts in excess of cash disbursements).

Profit (or loss) equals income minus expenses, and its recognition is mostly independent from when cash is received or paid.

The ability to meet short-term obligations is generally referred to as liquidity.

The ability to meet long-term obligations is generally referred to as solvency.