What is the term for a firm's ability to meet its commitments for financial liabilities?

The term that describes a firm's ability to meet its commitments for financial liabilities is working capital. Working capital represents the difference between a company's current assets and current liabilities. It is a crucial measure of an organization's short-term financial health and its efficiency in managing its operational expenses. A positive working capital indicates that the firm has enough assets to cover its short-term obligations, which is essential for sustaining operations and maintaining liquidity.

In contrast, gross revenue refers to the total income generated from sales before expenses and liabilities are deducted. While it reflects the overall sales performance, it does not provide insight into a company's financial stability or its ability to meet obligations.

Net worth, often referred to as equity, is the difference between total assets and total liabilities, but it encompasses a broader view of a company's financial position rather than its immediate ability to handle short-term debts.

Cash flow represents the net amount of cash being transferred into and out of the business. While healthy cash flow is critical for paying liabilities, it is not specifically defined as the ability to meet financial commitments, which is what working capital directly addresses.

Understanding these distinctions helps clarify why working capital is the appropriate term for assessing a firm's capability to meet its financial obligations in the short term.