Which of the Following Ratios Is Not a Measure of Long-Term

question 44

Multiple Choice

Which of the following ratios is not a measure of long-term solvency risk?

• A) Debt /Equity Ratio
• B) Interest Coverage Ratio
• C) Operating Cash Flows to Current Liabilities Ratio
• D) Liabilities to Assets Ratio

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and are an integral part of the finished product.

Conversion Costs

The sum of labor and overhead expenses incurred in the process of converting raw materials into finished goods.

Work In Process

Goods and materials that are partially completed in the manufacturing process, representing an inventory category on the balance sheet.

Inventory

Raw materials, work-in-progress, and finished goods that are considered part of a business's assets that are ready or will be ready for sale.