Multiple choice

Which of the following ratios is the indicator of the long term solvency of a firm?

  1. Acid - Test ratio

  2. Debt - Equity ratio

  3. Time interest earned ratio

  4. Return on investment ratio

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Debt-Equity ratio is a key indicator of a firm's long-term solvency. It measures the proportion of long-term debt to shareholder equity, showing the extent to which the firm relies on borrowed funds versus its own capital.