Which of the Following Solvency Ratios Is the Best Measure

question 17

Multiple Choice

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

• A)Debt-to-equity ratio
• B)Times interest earned ratio
• C)Debt service coverage ratio
• D)Earnings per share

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Definitions:

Chart of Accounts

An organized list of all the accounts used in a company's general ledger, categorized into assets, liabilities, equity, revenues, and expenses.

Ledger

A comprehensive collection of accounts where financial transactions are recorded, categorized, and summarized; an essential part of the accounting system.

Accounting Information System

A system used by businesses to collect, store, manage, process, retrieve, and report financial data for the purpose of informed decision-making.

General Ledger

A complete record of all financial transactions over the life of a company, used to compile financial statements.