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:

APR

The Annual Percentage Rate, which reflects the cost of borrowing on a yearly basis and includes interest and other charges.

Mortgage

A loan secured by real estate property, commonly used to purchase a home.

Prepaid Interest

Interest starts accruing (building) at the beginning of each month and continues throughout the month; prepaid interest at the closing is the amount of mortgage interest due to cover the time from the closing date to when the first mortgage payment is due.

Down Payment

The upfront money applied to a purchase that is made using a loan (credit).