Which of the following ratios are computed for evaluating solvency of the business?
(A) Proprietary Ratio
(B) Interest Coverage Ratio
(C) Total Asset to Debt Ratio
(D) Fixed Asset Turnover Ratio
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A), (B) and (C) only
Solvency ratios test the ability of the business to meet its long-term obligations, such as the repayment of loans and the payment of interest.
(A) Proprietary Ratio — True. Shareholders’ funds compared with total assets.
(B) Interest Coverage Ratio — True. How many times profit covers interest on long-term debt.
(C) Total Asset to Debt Ratio — True. How far total assets cover long-term debt.
(D) Fixed Asset Turnover Ratio — False. It measures how well fixed assets are used to make sales, so it is an activity (turnover) ratio.
NCERT (2026-27 edition):
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