A liability can be paid with another form of liabilityGroup of answer choicesTrueFalse

Analysis of the Statement

1. Understanding Liabilities: Liabilities refer to obligations that a company or individual owes to another party. These can include loans, credit debt, and other forms of debt.

2. Concept of Settling Liabilities: The idea that one liability can be settled with another liability refers to the practice of refinancing or rolling over debt. This can occur when a borrower pays off an existing debt using another loan or credit line.

Evaluation of the Statement

1. True Scenario: In many financial situations, it is possible to pay off one liability with another. For example, a person might take out a new loan with better terms to pay off an old loan.

2. False Scenario: However, this can also lead to a cycle of debt if not managed carefully. Relying solely on liabilities to settle other liabilities can indicate poor financial management and may adversely affect an entity's creditworthiness.

Conclusion

Given that there are situations where a liability can indeed be satisfied by taking on a new liability, the statement is considered True.