Solvency Ratios Level 1 Quiz Financial Analysis Quiz On Aug 7, 2024 Share /26 1234567891011121314151617181920212223242526 Solvency Ratios Level 1 26 questions in 10 minutes Pass Score 70% 1 / 26 A solvency ratio of less than 1 indicates more debt relative to equity. True False A solvency ratio of less than 1 suggests that debt exceeds equity 2 / 26 Solvency ratios are less important than liquidity ratios in financial analysis. True False Both solvency and liquidity ratios are important, but solvency ratios are critical for assessing long-term financial health 3 / 26 A lower solvency ratio generally indicates better financial stability. False True A lower solvency ratio might indicate higher financial risk; higher ratios typically indicate better stability 4 / 26 A high solvency ratio indicates a higher risk of bankruptcy. False True A high solvency ratio generally suggests a lower risk of bankruptcy because the company is more capable of meeting its long-term obligations 5 / 26 Solvency ratios are primarily used to evaluate short-term financial performance. True False Solvency ratios focus on long-term financial stability and debt management 6 / 26 The interest coverage ratio is a type of solvency ratio. False True The interest coverage ratio measures a company’s ability to pay interest on its debt, making it a solvency ratio. 7 / 26 Solvency ratios are not useful for comparing companies in different industries. True False While industry norms can affect comparisons, solvency ratios are still useful for assessing relative financial stability 8 / 26 Solvency ratios include the current ratio and quick ratio. False True The current ratio and quick ratio are liquidity ratios, not solvency ratios 9 / 26 Solvency ratios measure a company's ability to meet its short-term obligations. True False Solvency ratios focus on a company's long-term debt and financial stability, not short-term obligations 10 / 26 The debt-to-capital ratio is not considered a solvency ratio. True False The debt-to-capital ratio is a solvency ratio that measures the proportion of debt in the company's capital structure 11 / 26 The debt ratio and debt-to-equity ratio are both solvency ratios. False True Both ratios are used to assess a company’s long-term financial stability and debt levels 12 / 26 The proprietary ratio is a type of solvency ratio. True False The proprietary ratio measures the proportion of owners' equity in total assets, making it a solvency ratio 13 / 26 Solvency ratios include the operating cash flow ratio. True False The operating cash flow ratio is a liquidity ratio, not a solvency ratio 14 / 26 Solvency ratios can help assess a company's ability to pay off its long-term debts. True False Solvency ratios are specifically designed to assess long-term debt repayment capacity 15 / 26 The long-term debt to equity ratio is a solvency ratio. False True This ratio measures the proportion of long-term debt to equity, assessing long-term financial stability 16 / 26 The debt-to-equity ratio is a common solvency ratio. True False The debt-to-equity ratio measures the proportion of debt used relative to equity, which is a key solvency ratio. 17 / 26 Solvency ratios are used to evaluate a company's liquidity. False True Solvency ratios assess long-term financial health, not short-term liquidity 18 / 26 The debt-to-assets ratio is a solvency ratio. False True The debt-to-assets ratio assesses what portion of a company's assets are financed by debt, which is a key solvency measure 19 / 26 A solvency ratio of 1.5 means the company has more debt than equity. True False A solvency ratio of 1.5 suggests that equity is 1.5 times the debt, indicating more equity relative to debt 20 / 26 Solvency ratios can be influenced by a company's capital structure. True False A company's capital structure affects its solvency ratios by altering the balance between debt and equity 21 / 26 Companies with high solvency ratios are typically viewed as less risky. True False High solvency ratios generally indicate lower financial risk due to strong debt management capabilities 22 / 26 Solvency ratios are calculated using current liabilities and current assets. False True Solvency ratios are based on long-term debt and equity, not current liabilities and assets 23 / 26 The solvency ratio is calculated using only long-term liabilities. True False Solvency ratios typically involve both long-term liabilities and equity 24 / 26 The quick ratio is an example of a solvency ratio. False True The quick ratio is a liquidity ratio, not a solvency ratio 25 / 26 Solvency ratios are calculated to determine the short-term liquidity of a business. True False Solvency ratios are used to assess long-term financial health, not short-term liquidity 26 / 26 The equity ratio is a solvency ratio. False True The equity ratio measures the proportion of a company's assets financed by shareholders' equity, a solvency metric Your score is LinkedIn Facebook Twitter VKontakte 0% Send feedback define solvencyfinancial solvencyliquidity vs solvency
