Question

explain all solvency ratios

Answer 1

Debt-to-Equity

This ratio is a measure of total debt as compared to shareholder equity. As an equation, you take your business’ total liabilities and divide them by your shareholders’ equity.
Total-Debt-to-Total-Assets

This refers to the ratio of long-term and short-term liabilities compared to total holdings. As an equation, it is expressed as your business’ short- and long-term liabilities divided by its total assets. As a company’s total-debt-to-total-assets ratio increases, it poses a greater financial risk to banks and creditors.

Interest-Coverage Ratios

These ratios measure a company’s ability to keep up with interest payments, which rise along with outstanding debt. As a business owner, you can calculate interest-coverage ratio by dividing earnings before interest and tax (EBIT) by interest expenses.