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    Question

    In farm financial analysis, the net capital ratio used

    to assess solvency is computed as:
    A Total liabilities – total assets Correct Answer Incorrect Answer
    B Total liabilities / total assets Correct Answer Incorrect Answer
    C Total assets / total liabilities Correct Answer Incorrect Answer
    D Total assets / total demand Correct Answer Incorrect Answer
    E Net profit / total capital Correct Answer Incorrect Answer

    Solution

    The net capital ratio reflects the solvency of a farm. A ratio above 1 indicates that the farm has more assets than liabilities, signifying financial stability.

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