The correct answer is: C. Both A & B
Solvency requirements are the minimum amount of assets that a company must have to cover its liabilities. If a company does not meet its solvency requirements, it may be forced to close down. Increasing free assets is important because it allows a company to have more financial flexibility. This can be helpful in times of economic downturn or when a company needs to make large investments.
Here is a brief explanation of each option:
- A. Solvency requirements
Solvency requirements are the minimum amount of assets that a company must have to cover its liabilities. This means that a company must have enough assets to pay off its debts if it were to go out of business. Solvency requirements are important because they protect creditors and investors. If a company does not meet its solvency requirements, it may be forced to close down.
- B. Increasing free assets
Free assets are the assets that a company has after it has paid off its liabilities. Increasing free assets is important because it allows a company to have more financial flexibility. This can be helpful in times of economic downturn or when a company needs to make large investments.
- C. Both A & B
Both solvency requirements and increasing free assets are important considerations when distributing surplus. A company must ensure that it has enough assets to cover its liabilities, but it also needs to have enough assets to remain financially flexible.