Solvency Ratios

Q.

The liquidity of a business firm is measured by its ability to satisfy its long-term obligations as they become due. What are the ratios used for this purpose?

Q.

The higher value of total assets in total assets to debt ratio __________.

1. favorable

2. unfavorable

3. No conclusion

4. None of these

Q. ratio describes the ability of a business to meet its financial obligations in the long run.

1. Current
2. Liquidity
3. Solvency
4. Inventory

Q.

A lower value of debt to equity ratio represents:

1. No representation

2. the firm is more dependent on external funds or borrowed money

3. the firm is less dependent on external funds or borrowed money

4. None of these

Q.

A higher value of interest coverage ratio ratio indicates __________ relative to debts.

1. higher profits

2. lower profits

3. average profits

4. None of these

Q. A higher value of interest coverage ratio indicates relative to debts.

1. lower profits
2. higher profits
3. average profits
4. no profits

Q. The higher value of total assets in total assets to debt ratio is .

1. favorable
2. unfavorable
3. non-justifiable
4. not acceptable

Q. (A) What are the components of 'Current Ratio'?
(B) What are the different cash inflows and cash outflows of investing activities?

Q. If a ratio is computed with one variable from income statement and another variable from balance sheet, it is called as ________ ratio.

1. Income statement
2. Balance sheet
3. Composite
4. Liquidity

Q.

For proprietary ratio, a value closer to zero indicates a _________________ and is not favourable for the firm.

1. None of these

2. Can't say

3. higher percentage of debt as compared to equity

4. lower percentage of debt as compared to equity

Q. Formula for current ratio is .

1. Current liabilities/current assets
2. Current assets/current liabilities
3. Fixed asset/ fixed liabilities
4. Fixed liabilities/fixed assets

Q. (A) What are the objectives of 'ratios'?
(B) State the various sources of cash inflows from operating activities.

Q. Objective type Questions.
Answer in one Sentence only.

What is Capital Deficiency?

Q. Consider the following items :
i)Debentures
ii)Prepaid rent
iii)Interest accrued
iv)Bank overdraft
Which of them are current liabilities?

1. (iv)
2. (i), (ii), (iii) and (iv)
3. (ii), (iii) and (iv)
4. (i), (ii) and (iii)

Q. Match the items of List-1 with those of List -II and indicate the correct code:

Q. The appropriate ratio for indicating liquidity crisis is .

1. Operating ratio
2. Sales turnover ratio
3. Current ratio
4. Acid test ratio

Q. State whether the following statements are True or False.

Debit balance of insolvent Partner’s Capital A/c is known as Capital Deficiency.