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How many of these ratios are used to evaluate long-term financial stability? - Debt ratio -...

How many of these ratios are used to evaluate long-term financial stability?
- Debt ratio
- Equity ratio
- Capitalisation ratio
- Current ratio
- Acid test ratio

Select one:
a. 2
b. 3
c. 4
d. 5

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Homework Answers

Answer #1

Answer : B) 3

Three Raios From the above are Used to Evaluate the Long-Term Financial Stability. Those are

  1. Debt Ratio
  2. Equity Ratio
  3. Capitalization Ratio

Current Ratio and Acid Test Ratio Evaluate the Liquidity of the Firm in a short Run.

Long-Term Financial stability of the firm Depends on the Capital Structure composition of the firm. The Portion of the Debt and Equity in the total Captial measures the Lon-term Financial Stability and Solvency of the Firm

Debt Ratio = Total Liabilities / Total Assets

Equity Ratio = Equity Share Capital / Total Assets

Capitalization Ratio = Long term Debt / ( Long term Debt + Share holder's Equity)

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