Ratio - Edubook - Solvency ratio
8 important questions on Ratio - Edubook - Solvency ratio
What shows the solvency ratio?
Formula of 'interest coverage ratio'
The solvency of a business is particularly important for providers of equity.
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By calculating the solvency, debt providers gain an idea of the buffer a business has in case of liquidation.
The solvency ratios are calculated based on the liquidation value of the assets.
For debt providers, the higher the debt ratio, the better.
The interest coverage ratio should at least be 1 to be able to pay the interest expenses from the achieved profit.
The guaranteed capital is an important indicator for debt providers.
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