Question

A ratio estimates the risk associated with investing in a firm.

Answer 1

A ratio which estimates the risk associated with investing in a business firm is called: solvency ratio.

Solvency ratio can be defined as a key metric that is typically used to measure the ability of a business firm to meet its long-term debt obligations.

Basically, a solvency ratio measures the financial position of a business firm and the extent to which its assets cover long-term debt obligations (commitments), especially for future payments and the liabilities.

In conclusion, a ratio which estimates the risk associated with investing in a business firm is called solvency ratio.

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