Which one of the following ratios is most important for judging the long term solvency of the firm?

A. Debt equity ratio

A. Debt Equity Ratio:- 

• It is the relation of total debt to total equity of the company. It indicates the degree of financial leverage applied in the short term and long term debt of the company besides equity. A high debt equity ratio implies high interest expense, and in such case it will be very difficult to raise further debt.

A. Debt equity ratio, if debt is more than equity, the majority of profit will be paid lenders. eventually will negatively affect the company's cash flow in the future.