Debt to equity ratio is one of the solvency ratio used in evaluation of company’s solvency position. Debt to equity ratio is calculated by dividing the total liabilities of the company by total equity of the company at a particular date. To calculate: the debt to equity ratios and identify the riskier company. Debt to equity ratios are calculated as follows: Company A Company S Total liabilities (A) 429,000 549,000 Total equity (B) 572,000 1,830,000 Debt to equity ratio (A/B) 0.75 0.30 Company A has more risky capital structure as it has higher debt to equity ratio.

An investor worried about a company’s long-term solvency would most likely examine its:C . debt-to-equity ratio

Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: O a. They show the relative proportion of debt items with respect to shareholders' equity or total capital. b. They show the profitability of the company over a specific period of time. c. They show the probability of whether the company will face problems in operations. O d. They show the relative levels of liquid assets of the company.

Which of the following is the correct explanation for the purpose of financial risk ratios? Select one: a. They show the probability of whether the company will face problems in operations. b. They show the profitability of the company over a specific period of time. c. They show the relative proportion of debt items with respect to shareholders' equity or total capital. d. They show the relative levels of liquid assets of the company. According to the information given in the table below, which of the following is Raw materials consumed? Opening Stock Raw Materials 32300 Purchases 128800 Freight in 4950 Sales return 2350 Wages paid to labor 78900 Closing Stock Raw Materials 28400 Select one: a. 135300 b. 149900 c. 143700 d. 137650 d. Current ratio