Long-term solvency is indicated by:

The correct answer is Option (2) → debt-equity ratio

Note: For this question, Option (3) could also be a possible answer, as explained below.

Long-term solvency is the ability of the firm to meet its long-term obligations: the interest on and the repayment of long-term loans. It is judged by the solvency ratios, which compare the long-term funds supplied by outsiders with those of the owners.

Option (1) liquid ratio — Incorrect. The liquid ratio compares quick assets with current liabilities; it measures short-term liquidity.

Option (2) debt-equity ratio — Correct. Long-term debt ÷ shareholders' funds; a low ratio means more security for long-term lenders. It is the first of the solvency ratios in NCERT.

Option (3) capital-gearing ratio — Should also be correct. It compares fixed-interest and fixed-dividend funds (debentures, long-term loans, preference capital) with equity funds, so it too shows how heavily the firm depends on long-term borrowing. It is not one of the ratios NCERT lists, which is why the debt-equity ratio is the better answer.

Option (4) profitability ratio — Incorrect. Profitability ratios measure the profit earned, not the firm's ability to repay long-term debt.