Ratios that measure solvency include
A)Pledged assets to secured liabilities
B)Current ratio
C)Times interest earned
D)Total asset turnover
E)Both pledged assets to secured liabilities and times interest earned

Question

Quizplus · Accepted Answer

Ratios that measure solvency are those that assess a company's ability to meet long-term obligations. Both pledged assets to secured liabilities and times interest earned are examples of such ratios. The pledged assets to secured liabilities ratio measures the degree to which a company's assets are pledged to secure long-term debt, while the times interest earned ratio measures the company's ability to cover interest payments on its debt. Current ratio and total asset turnover are measures of liquidity and efficiency, respectively, and do not directly assess long-term solvency.

Ratios That Measure Solvency Include