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

A. Debt equity ratio B. Stock turnover ratio C. Return on investment D. Fixed assets turnover ratio

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Question added by Mohammad Ali , Accounts Officer ( Contract) , Bharat Pumps & Compressors Ltd Naini Allahabad
Date Posted: 2014/12/14
VENKITARAMAN KRISHNA MOORTHY VRINDAVAN
by VENKITARAMAN KRISHNA MOORTHY VRINDAVAN , Project Execution Manager & Accounts Manager , ALI INTERNATIONAL TRADING EST.

A. Debt equity ratio

Nissam Khalid
by Nissam Khalid , Finance Manager , Saudi Specialized Pipes

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.

 

Ezzidin Ibrahim
by Ezzidin Ibrahim , Financial Controller , Karim Food Industries

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.

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