Which of the following ratios is most useful in evaluating solvency?
A)Debt to equity ratio.
B)Current ratio.
C)Receivables turnover ratio.
D)Inventory turnover ratio.

Question

Quizplus · Accepted Answer

The debt to equity ratio is the most useful ratio in evaluating solvency as it measures the amount of debt a company has relative to its equity. A high debt to equity ratio indicates that a company may have trouble meeting its debt obligations and may be at risk of default. Therefore, a lower debt to equity ratio is generally more favorable for solvency.

Which of the Following Ratios Is Most Useful in Evaluating