Which statement best describes the changed financial position? (A) Solvency has declined and profitability has increased from 2006 to 2007 - HSC - SSCE Business Studies - Question 13 - 2007 - Paper 1

To evaluate the changed financial position, we need to analyze the trends in solvency and profitability between the years 2006 and 2007.

1. Understand the terms:

   • Solvency refers to the ability of a company to meet its long-term debts and financial obligations.
   • Profitability measures the company's ability to generate profit relative to its revenue or assets.

2. Analyze the statements:

   • (A) states that solvency has declined while profitability has increased, which would not typically indicate a healthy financial position.
   • (B) indicates that profitability has decreased while solvency has improved, suggestive of a stable long-term outlook despite short-term profitability issues.
   • (C) mentions improvement in expense ratio without direct commentary on profitability or solvency trends.
   • (D) suggests a good position in relationship to the industry average but does not clarify trends.

3. Choose the best option: Since statement B directly addresses both profitability and solvency, and recognizes the improvement in solvency despite decreased profitability, it accurately reflects a changed financial position.