Based on following data related to Ambe limited, Jaipur, Answer question.
|
|
₹ |
|
Revenue from operations |
8,40,000 |
|
Cost of revenue from operations |
4,20,000 |
|
Selling Expenses |
80,000 |
|
Administrative Expenses |
40,000 |
|
Equity share capital |
1,00,000 |
|
8% preference share capital |
50,000 |
|
10% debentures |
1,00,000 |
|
Profit after Tax |
1,74,000 |
|
Tax Rate |
40% |
Identify the ratio that determine the ability of the business to service its debts in the long run.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1 - Solvency ratios.
Solvency ratios determine the ability of the business to service its debts in the long run.
Solvency ratios focus on assessing a business's capability to fulfill its long-term debt obligations rather than short-term ones. Solvency ratios are calculated to determine the ability of the business to service its debt in the long run.
Examples of solvency ratios include the debt equity ratio, total assets to debt ratio, proprietary ratio, and interest coverage ratio.