Question

An analyst who is interested in a company’s long-term solvency would most likely examine the:

A Return on total capital Correct Answer Incorrect Answer
B Interest coverage ratio Correct Answer Incorrect Answer
C Current ratio Correct Answer Incorrect Answer
D Inventory turnover ratio Correct Answer Incorrect Answer
E None of the above Correct Answer Incorrect Answer

Solution

Fixed charge/Interest coverage is a solvency ratio. Return on total capital is a measure of profitability. The rest of the ratios are liquidity and turnover ratios.

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