Which of the Following Solvency Ratios Is the Best Measure

question 58

Multiple Choice

Which of the following solvency ratios is the best measure to determine the degree to which a company relies on outsiders for funds?

• A)Debt-to-equity ratio
• B)Times interest earned ratio
• C)Debt service coverage ratio
• D)Cash flow from operations to capital expenditures ratio

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Definitions:

Long-Term Equities

Investment securities that represent ownership in a company or corporation and are held for a period longer than one year.

Maturity Matching

A financial strategy that entails matching the duration of assets and liabilities to minimize risk associated with cash flow mismatches.

Project Duration

The total time required to complete a project from start to finish.

Financing Term

Conditions and duration under which money is borrowed or lent, including interest rate, repayment schedule, and other loan covenants.