Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

Identify the ratio that is not computed for evaluating the solvency of the business.

Options:

Debt-Equity Ratio

Proprietary Ratio

Operating Ratio

Interest Coverage Ratio

Correct Answer:

Operating Ratio

Explanation:

Operating Ratio is computed to analyze cost of operation in relation to revenue from operations. It is a profitability ratio.
Solvency ratios are calculated by the company to determine the ability of the company to service its debt in the long run instead of in the short run. It include debt-equity ratio, total assets-to-debt ratio, proprietary ratio and interest coverage ratio.