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Which of the following are not long-term solvency ratios?Return on Shareholders EquityDebt Equity ratioDebt service coverage ratioLong-term debt to assets

Question

Which of the following are not long-term solvency ratios?

  • Return on Shareholders Equity
  • Debt Equity ratio
  • Debt service coverage ratio
  • Long-term debt to assets
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Solution

The long-term solvency ratios are used to measure a company's ability to meet its long-term obligations. They provide insight into the long-term financial health of a company.

  1. Return on Shareholders Equity: This is not a long-term solvency ratio. It is a profitability ratio that measures the ability of a company to generate profits from its shareholders' investments.

  2. Debt Equity ratio: This is a long-term solvency ratio. It measures the financial leverage of a company and shows the proportion of a company's funding that comes from debt compared to equity.

  3. Debt service coverage ratio: This is a long-term solvency ratio. It measures a firm's ability to service its current debts.

  4. Long-term debt to assets: This is a long-term solvency ratio. It measures the proportion of a company's assets that are financed by long-term debt.

So, the Return on Shareholders Equity is not a long-term solvency ratio.

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