Module 1 - DB#4

What is the relevance or importance of solvency ratios?

How do internal and external stakeholders utilize solvency ratios?

Which solvency ratio is most important and why?

What is the relevance or importance of solvency ratios?
• They measure the ability of an organization to pay its long-term debt.

How do internal and external stakeholders utilize solvency ratios?
• Internal and external stakeholders use solvency ratios to measure the leverage of an organization and then they can also compare that to other organizations.

Which solvency ratio is most important and why?
• I think that the debt coverage ratio is the most important solvency ratio because it shows how well the organization can pay for its debts in the next year.

I think that Solvency ratios are overrated (I'm making this up to better understand the software) in that the only thing that matters is can a company generate profits to pay their outstanding debt.