A common measure of long-term solvency is the
A)cash total debt coverage ratio.
B)current ratio.
C)asset turnover ratio.
D)inventory turnover ratio.

Question

Quizplus · Accepted Answer

The cash total debt coverage ratio measures cash flow from operating activities relative to total debt, making it a good measure of long-term solvency. It shows the ability of a company to generate enough cash to cover all its debt obligations, including long-term debt, over a period of time. The current ratio measures short-term liquidity, the asset turnover ratio measures efficiency in using assets to generate revenue, and the inventory turnover ratio measures how quickly a company is selling its inventory.

A Common Measure of Long-Term Solvency Is the