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Solvency Ratios. SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Solvency Ratios Solvency.

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Presentation on theme: "Solvency Ratios. SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Solvency Ratios Solvency."— Presentation transcript:

1 Solvency Ratios

2 SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Solvency Ratios Solvency ratios measure the ability of a company to survive over a long period of time. Debt to total assets and times interest earned are two ratios that provide information about debt-paying ability.

3 SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Measures the percentage of the total assets that creditors provide. Solvency Ratios

4 SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Provides an indication of the company’s ability to meet interest payments as they come due. Solvency Ratios

5 SO 5 Identify and compute ratios used in analyzing a firm’s liquidity, profitability, and solvency. Ratio Analysis Illustration 14-27 Summary of solvency ratios Solvency Ratios

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