Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

These ratios are calculated to determine ability to meet contractual obligations:

A. Proprietary Ratio
B. Inventory Turnover Ratio
C. Debts to Capital Employed Ratio
D. Investment Turnover Ratio
E. Interest Coverage Ratio

Choose the correct answer from the options given below:

Options:

A, B and D only

A, C and E only

A, D and E only

A, B and E only

Correct Answer:

A, C and E only

Explanation:

The correct answer is Option (2) - A, C and E only.

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.

*OTHERS ARE ACTIVITY RATIO.