To assess the long term solvency of the business, which of the follow…

The correct answer is Option (1) → (A), (B) and (D) only

Long-term solvency is the ability of the business to pay the interest on its long-term debt and to repay that debt in the long run. The ratios that test it are the solvency ratios. Ratios that test whether short-term liabilities can be paid are liquidity ratios, which answer a different question.

(A) Interest coverage ratio Correct. It shows how many times the profit before interest and tax covers the interest on long-term debt, so it tells lenders how safe their interest is.

(B) Proprietary ratio Correct. It compares shareholders' funds with total assets. A high ratio means the owners, not lenders, finance most of the assets, which makes the business safer for long-term creditors.

(C) Acid test ratio Incorrect. It compares quick assets with current liabilities and is a liquidity ratio; it measures short-term paying ability, not long-term solvency.

(D) Debt to capital employed ratio Correct. It shows what part of the capital employed comes from long-term debt, so it measures the burden of long-term borrowing.