Answer
a) Liquidity means company's short term ability to pay its maturing obligations and to meet unexpected needs for cash.
b) Solvency means company's ability to survive over a long period of time
Work Step by Step
a)Company's liquidity can be measured from the following ratios:
Current ratio.
Current cash debt coverage ratio
Inventory turnover ratio
Receivables turnover ratio
b) Company's solvency can be measured from the following ratios:
Debt to total assets ratio
Cash debt coverage ratio
Times interest earned ratio