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Questions
What is meant by solvency of business?
What do you mean by ‘Solvency’?
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Solution
Solvency means the ability of the business to meet its long-term liabilities. Solvency ratios such as Debt to Equity Ratio, Total Asset to Debt Ratio, Interest Coverage Ratio, etc., are some of the essential solvency ratios that help investors to know whether the company’s cash flow is sufficient to meet its short-term and long-term liabilities. The better the solvency position of a business, the better the market standing of such firms.
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From the Following information , compute Debt-Equity Ratio:
Rs.
Long Term Borrowings 2,00,000
Long Term Provision 1,00,000
Current Liabilities 50,000
Non-Current-Assets 3,60,000
Current -Assets 90,000
Give the meaning of 'Long-Term Provisions'.
From the Following information, compute Debt-Equity Ratio
| Long-Term Borrowings | 4,00,000 |
| Long-Term Provision | 2,00,000 |
| Current Liabilities | 1,00,000 |
| Non-Current-Assets | 7,20,000 |
| Current -Assets | 1,80,000 |
From the Following information, compute Debt-Equity Ratio
| Rs | |
| Long-Term Borrowings | 8,00,000 |
| Long-Term Provision | 4,00,000 |
| Current Liabilities | 2,00,000 |
| Non-Current-Assets | 14,40,000 |
| Current -Assets | 3,60,000 |
Calculate Debt-Equity Ratio
| Particulars | Rs |
| Total Assets | 3,50,000 |
| Total Debts | 2,50,000 |
| Current Liabilities | 80,000 |
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