Financial and Management Accounting

1: Given that fixed assets are at Rs. 600,000 current assets Rs. 400,000 share capital Rs. 500,000, fixed liabilities Rs. 2,50,000, Current liabilities Rs. 2,50,000, the solvency ratio will be
A.

20%

B.

30%

C.

40%

D.

50%

 

Answer : A

Explanation :
Total assets/total liabilities=solvency ratio which means 1000000/500000=20%

selvi said: (2:34pm on Monday 6th June 2016)
total assets/total liabilities=solvency ratiowhich means 1000000/500000=20%
DURGA PRASAD MOHAPATRA said: (6:36pm on Thursday 29th June 2017)
Solvency ration mean whether Cash flow of the company can be sufficient to meet the liabilities to b paid off(i.e long term
tulsi ravada said: (12:19pm on Monday 17th July 2017)
Solvency ratio = total liabilities / total assets so 500000/1000000= 50%
Surajit Basu said: (7:47pm on Wednesday 18th April 2018)
why 1000000/500000x100=20% please describe..and what is the correct ans.Solvency ratio is one of the various ratios used to measure the ability of a company to meet its long term debts. Moreover, the solvency ratio quantifies the size of a company’s after tax income, not counting non-cash depreciation expenses, as contrasted to the total debt obligations of the firm. Also, it provides an assessment of the likelihood of a company to continue congregating its debt obligations.FormulaThe formula used for computing the solvency ratio is:Solvency ratio = (After Tax Net Profit Depreciation) / Total liabilities.

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Option: A

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