Which ratio provides the information that is critical to the long-run operation of the company?
Answer & explanation
Correct answer: option 2
The persons who have advanced money to the business on long-term basis
are interested in safety of their periodic payment of interest as well as the repayment of principal amount at the end of the loan period. Solvency ratios
are calculated to determine the ability of the business to service its debt in
the long run.