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Explain Solvency ratios
The term solvency refers of the ability of a concern to meet its long term obligations. The long term indebtedness of a firm include debenture holders, financial institutions providing medium and long term loans and other creditors selling goods on installment basis. The long term borrowing repayment of the prinivipal amount at the maturity and the security of their loans. Accordingly long term solvency ratios indicate a firm borrowing repayment of the principal amount at the maturity and the security of their loans. Accordingly long term solvency ratios indicate a firm ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowing.
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