Identify the ratio out of the following options which is not computed for evaluating the long-term solvency of a business.
- ADebt-Equity Ratio
- BProprietary Ratio
- COperating Ratio
- DInterest 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.