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Question 5.
atio and nOW I helps evaluate a companys historical performance or future performance from an outsiders view. 5. What are s
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Solvency ratios determine how financially sound the firm is by considering the debt position of the company. Solvency ratio measures the enterprise's capacity to meet it's debt obligations. It considers the proportions of debt to equity and debt to asset. Banks will check the financial capacity to advance a loan. Banks would also consider the Operating Income ratio to evaluate whether the revenue , net income are up to the mark or not.

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