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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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