Why is the long-term solvency ratio important for stakeholders?
A) It may indicate excessive inventories that cannot be sold.
B) It indicates the earnings per share a stakeholder can expect to receive.
C) It indicates the efficiency with which a firm uses resources.
D) It indicates the firm's ability to generate cash.
E) It may indicate collapse or takeover opportunities.

Question

Quizplus · Accepted Answer

The long-term solvency ratio is important for stakeholders because it indicates the firm's ability to meet its long-term obligations, which can signal financial stability or distress, potentially leading to collapse or takeover opportunities.

Why Is the Long-Term Solvency Ratio Important for Stakeholders