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Question : Which ratios provide information critical to the firm's long-term operation?

Option 1: Profitability 

Option 2: Solvency

Option 3: Activity

Option 4: Liquidity


Team Careers360 4th Jan, 2024
Answer (1)
Team Careers360 25th Jan, 2024

Correct Answer: Solvency


Solution : One statistic used to evaluate a company's capacity to repay its long-term financial obligations is the solvency ratio.
It evaluates the ratio of a company's total debt commitments to its after-tax income, excluding non-cash depreciation charges.
For the long-term operation of the company, these ratios offer the crucial information.
Hence option 2 is the correct answer.

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