Question

g Given the information below: ASSETS LIABILITIES Cash and cash equivalents $10,000 Current debts for the year $15,000 Other liquid assets $20,000 Other total liabilities $200,000 Investments $250,000 Fixed assets $300,000 INCOME DATA Annual after-tax income $75,000 Annual spending $67,000 The solvency ratio is closest to: A. 63% B. 33% C. 4% D. none of the above

Answer 1

Answer:

The solvency ratio is closest to: B. 33%.

Explanation:

The solvency ratio = After tax Net Operating Income ÷ Total Debt

Thus,

The solvency ratio = $75,000 ÷ ($15,000 + $200,000)

                               = 35.88%

Therefore this is closest to B. 33%.