Question : Which of the following shows the Long term solvency?
Option 1: Debt/Equity Ratio
Option 2: Liquid Ratio
Option 3: Debtor Turnover Ratio
Option 4: Quick Ratio
Answer (1)
10th Jan, 2024
Correct Answer: Debt/Equity Ratio
Solution :
The debt-equity ratio is an indicator of long-term solvency. The debt-to-equity (D/E) ratio is derived by dividing the total long term liabilities of a corporation by the equity held by shareholders.
The balance sheet of the company's financial statements is where these values are found.
Hence option 1 is the correct answer.
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