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Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm. What does Debt-Equity Ratio help to study?

<p><strong><span>(a)Solvency,</span></strong></p> <p><strong><span>(b)Liquidity,</span></strong></p> <p><strong><span>(c)Profitability,</span></strong></p> <p><strong><span>(d) Turnover,</span></strong></p>

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تم إضافة السؤال من قبل VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.
تاريخ النشر: 2014/10/15
مستخدم محذوف‎
من قبل مستخدم محذوف‎

Answer A is correct

Ezzidin Ibrahim
من قبل Ezzidin Ibrahim , Financial Controller , Karim Food Industries

Solvency of the company in the long run

imran Noor -
من قبل imran Noor - , Audit Officer , Auditor General of Pakistan

The correct answer is (a)

The ratio shows how much of the firm is financed by Debt in comparison to Equity. Higher ratio, higher dependence on external lenders and so higher risk of solvency.

Dasarathi Rath
من قبل Dasarathi Rath , Sr. Accountant , Al Luban Special Investment LLC

Ration analysis can be used to study of liquidity, turn over profitability of a firm....

The answer is C. Profitability

Ayman Esa Mustafa Farrag
من قبل Ayman Esa Mustafa Farrag , مدير مالي , شركة الصفوف

 

A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets.

Debt/Equity Ratio

Khaled Mohee Eldeen Abbas Mahmoud
من قبل Khaled Mohee Eldeen Abbas Mahmoud , Chartered Accountant # 10465 , Self-employed

(a)Solvency

Debt-to-equity ratio  measures the degree to which the assets of the business are financed by the debts and the shareholders' equity of a business. 

Lower values of debt-to-equity ratio are favorable indicating less risk. Higher debt-to-equity ratio is unfavorable because it means that the business relies more on external lenders thus it is at higher risk, especially at higher interest rates. A debt-to-equity ratio of1.00 means that half of the assets of a business are financed by debts and half by shareholders' equity. A value higher than1.00 means that more assets are financed by debt that those financed by money of shareholders' and vice versa.

georgei assi
من قبل georgei assi , مدير حسابات , المجموعة السورية

(d) Turnover,

 

 

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Only Interest bearing Debt should be considered, therefore, Debt/equity; In addition. Classification of debt should be based on seniority as per credit agreement.

Senior Debt /  Equity

Subordinated Debt /  equity

Total Debt / Equity

 

georgei assi
من قبل georgei assi , مدير حسابات , المجموعة السورية

Answer a correct answer (a) Solvency,

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