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Solvency Ratios

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    • Solvency Ratios

    Solvency ratios indicates the company’s ability to meet its long term liabilities like long term borrowings. It examines the company’s capital structure to determine if the company is over burdened with debt such such that its very  solvency is at question.

    Below are the important solvency ratios we will learn as part of this resources.

    Click on each ratios to learn their meaning, formula along with examples, interpretation and real life application

    • Debt to capital ratio

      High Debt to capital ratio indicates company’s significant part of capital is in the form of borrowings..

    • Debt to asset ratio

      High debt to asset ratio signals major solvency issue. It indicates the company does not have sufficient..

    • Debt to equity ratio

      High debt to Equity ratio is to be seen cautiously. It indicates that the company is aggressive in financing..

    • Capital gearing ratio

      High gearing ratio means the company has a larger proportion of debt versus equity. Low gearing ratio means…

    • Financial Leverage ratio

      High financial leverage ratio signals that the company is using less of equity and more or debt to run the…

    • Interest coverage ratio

      Low interest coverage ratio signals that the company earns insufficient earnings to payoff interest which…

            

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