The measure of solvency among the options given is the Times interest earned ratio.

Here's why:

1. Times interest earned ratio: This is a solvency ratio that measures a company's ability to meet its interest payments when they come due. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. A higher ratio indicates a better ability to meet interest obligations, hence it is a measure of solvency.

2. Days' sales in inventory: This is a measure of liquidity, not solvency. It measures how quickly a company can convert its inventory into sales.

3. Acid-test ratio: This is a measure of liquidity. It measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

4. Current ratio: This is another measure of liquidity. It measures a company's ability to pay off its short-term liabilities with its short-term assets.

5. Total asset turnover: This is a measure of efficiency, not solvency. It measures how efficiently a company uses its assets to generate sales.

So, the Times interest earned ratio is the only solvency ratio in the options given.

Question

The measure of solvency among the options given is the Times interest earned ratio.

Here's why:

1. Times interest earned ratio: This is a solvency ratio that measures a company's ability to meet its interest payments when they come due. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. A higher ratio indicates a better ability to meet interest obligations, hence it is a measure of solvency.

2. Days' sales in inventory: This is a measure of liquidity, not solvency. It measures how quickly a company can convert its inventory into sales.

3. Acid-test ratio: This is a measure of liquidity. It measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

4. Current ratio: This is another measure of liquidity. It measures a company's ability to pay off its short-term liabilities with its short-term assets.

5. Total asset turnover: This is a measure of efficiency, not solvency. It measures how efficiently a company uses its assets to generate sales.

So, the Times interest earned ratio is the only solvency ratio in the options given.

Knowee AI · Accepted Answer

The measure of solvency among the options given is the Times interest earned ratio.

Here's why:

1. Times interest earned ratio: This is a solvency ratio that measures a company's ability to meet its interest payments when they come due. It is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense. A higher ratio indicates a better ability to meet interest obligations, hence it is a measure of solvency.

2. Days' sales in inventory: This is a measure of liquidity, not solvency. It measures how quickly a company can convert its inventory into sales.

3. Acid-test ratio: This is a measure of liquidity. It measures a company's ability to pay off its current liabilities without relying on the sale of inventory.

4. Current ratio: This is another measure of liquidity. It measures a company's ability to pay off its short-term liabilities with its short-term assets.

5. Total asset turnover: This is a measure of efficiency, not solvency. It measures how efficiently a company uses its assets to generate sales.

So, the Times interest earned ratio is the only solvency ratio in the options given.

Which of the following ratios is a measure of solvency?Multiple ChoiceTimes interest earned ratio.Days' sales in inventory.Acid-test ratio.Current ratio.Total asset turnover.

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