GENERAL KNOWLEDGE

Detailed explanation-1: -The debt-Equity ratio helps to study (a) solvency. Solvency: Solvency is one indicator of a company’s financial health since it shows how well it can manage operations shortly. Ratios can be used by investors to assess a company’s solvency.

Detailed explanation-2: -Ratio Analysis can be used to study liquidity, turnover, profitability, etc. of a firm.

Detailed explanation-3: -The D/E formula helps investors and business owners understand what percentage of debt is short term, and how much is due to shareholder equity (long-term debt.) A high D/E ratio suggests that a business may not be in a good financial position to cover debts.

Detailed explanation-4: -The debt-to-equity ratio measures solvency, which is the ability of a company to pay its debt and continue operating the business in the future years. The current ratio measures a companies liquidity, which is the ability of companies to convert current assets into cash.