Which of the Following Solvency Positions Would a Company Consider

question 44

Multiple Choice

Which of the following solvency positions would a company consider most favourable?

• A)a high debt to total assets ratio and a low times interest earned ratio
• B)a low debt to total assets ratio and a high times interest earned ratio
• C)a high debt to total assets ratio and a high times interest earned ratio
• D)a low debt to total assets ratio and a low times interest earned ratio

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Definitions:

Accounts Payable

A liability account on a company’s balance sheet representing money owed to creditors for goods and services purchased on credit.

Special Journals

Accounting journals designed for recording specific types of transactions in detail, such as sales, purchases, cash receipts, and disbursements, for efficient processing.

Cash Receipts Journal

A dedicated accounting ledger for documenting all cash inflows.

Purchases Journal

A record that specifically tracks all purchase transactions made by a business, often used in a manual accounting system.