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easyMCQCUET Accountancy 2023 29 May Shift 22026Accountancy
1 mark

Identify the ratio out of the following options which is not computed for evaluating the long-term solvency of a business.

  1. A
    Debt-Equity Ratio
  2. B
    Proprietary Ratio
  3. C
    Operating Ratio
  4. D
    Interest Coverage Ratio

Solution & Step-by-step Explanation

Let's look at the functional classification of these ratios:Solvency Ratios: These evaluate long-term financial security and obligations capabilities. Debt-Equity Ratio, Proprietary Ratio, and Interest Coverage Ratio fall under this.Profitability Ratios: Operating Ratio is a profitability ratio (specifically an efficiency/cost-based profitability ratio) that expresses the relationship of operating track expenses to revenue from operations. It has nothing to do with long-term debt solvency.

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Identify the ratio out of the following options which is not computed for evaluating the long-term solvency of a business.
A
Debt-Equity Ratio
B
Proprietary Ratio
C
Operating Ratio
D
Interest Coverage Ratio

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