Long-term creditors are also interested in the current ratio because a company that is unable to pay short-term debts may be forced into bankruptcy. For this reason, many bond indentures, or contracts, contain a provision requiring that the borrower maintain at least a certain minimum current ratio.
Long-term liabilities (long-term debts) Long-term liabilities, also called long-term debts, are debts a company owes third-party creditors that are payable beyond 12 months. This distinguishes them from current liabilities, which a company must pay within 12 months.
Long-term creditors are most interested in a company's ability to pay its obligations into the future. Solvency ratios provide information that long-term creditors can use to assess the risk of lending to a company.
Answer and Explanation: The correct answer is option c. liquidity and solvency. Existing and potential long-term creditors are usually interested in evaluating the liquidity...
Bondholders use the firm's financial statements to assess the ability of the company to make its debt payments. Stockholders use the statements to assess the firm's profitability and ability to make future dividend payments.
Explain. An increase in book value does not necessarily indicate an increase in Global's share price. The market value of a stock does not depend on the historical cost of the firm's assets, but on investors' expectation of the firm's future performance.
The interest coverage ratio#N#Interest Coverage Ratio Interest Coverage Ratio (ICR) is a financial ratio that is used to determine the ability of a company to pay the interest on its outstanding debt.# N#shows how easily a company can pay its interest expenses:
The current ratio, also known as the working capital ratio, measures the capability of a business to meet its short-term obligations that are due within a year. The ratio considers the weight of total current assets versus total current liabilities. It indicates the financial health of a company.
Comparing financial ratios with that of major competitors is done to identify whether a company is performing better or worse than the industry average. For example, comparing the return on assets between companies helps an analyst or investor to determine which company is making the most efficient use of its assets.
In other words, leverage financial ratios are used to evaluate a company’s debt levels. Common leverage ratios include the following: The debt ratio. Debt to Asset Ratio The debt to asset ratio, also known as the debt ratio, is a leverage ratio that indicates the percentage of assets that are being financed with debt.