Preview

Solvency Ratios: Riordan Industries

Satisfactory Essays
Open Document
Open Document
399 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Solvency Ratios: Riordan Industries
Solvency Ratios
Solvency ratios are used by long-term creditors and stockholders to measure a company’s debt-paying ability, particularly its ability to pay interest as it comes due and to repay the face value of debt at maturity (Weygandt, 2010). There are two types of solvency ratios that provide information about debt-paying ability; debt to total assets ratio and times interest earned (also called interest coverage).
Debt to assets ratio
Formula: Divide total liabilities by total assets. The formula is:
Total liabilities
Total assets
A ratio greater than 1 indicates that a considerable proportion of assets are being funded with debt, while a low ratio indicates that the bulk of asset funding is coming from equity. Riordan Industries |
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Powerful Essays

    Tootsie Roll Industries Loan Package
    • 1628 Words
    • 7 Pages

    Tootsie Roll Industries Loan Package

    Solvency ratio is the process of analyzing the company’s capacity to pay its obligations while keeping the business going (Martin, 2009). Total assets are measured in terms of percentage against total liabilities:…

    • 1628 Words
    • 7 Pages
    Powerful Essays
    Read More
  • Good Essays

    EGT1 Task 3
    • 1171 Words
    • 5 Pages

    EGT1 Task 3

    The first ratio calculated was current ratio. This is done by dividing current liabilities by current assets. Current ratio is important because it shows the business’s ability to pay back the current liabilities with the current assets that they have available to them. At the end of 2011, the current ratio was at 1.86. In 2012, this ratio dropped to 1.80. The industry ranges from 3.1 (showing a strong ability to pay back liabilities) to 1.4 (showing a weak ability to pay back liabilities) with a median of 2.1. Company G is below the median showing a weakness in this category.…

    • 1171 Words
    • 5 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Acc561 R5 Study Guide Week2
    • 330 Words
    • 2 Pages

    Acc561 R5 Study Guide Week2

    Solvency ratios: Measures the ability of a company to pay long-term liabilities and to survive over a long-term period. Investors and employees are most interested in solvency indicators. Examples of solvency ratios include:…

    • 330 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Better Essays

    Acc 291 Week 5 Memo
    • 757 Words
    • 4 Pages

    Acc 291 Week 5 Memo

    Ratios are used to analyze financial statements to determine their profitability, liduidity and solvency. Liquidity Ratios are used by suppliers and short-term creditors such as bankers to measure the ability of an organization to pay its maturing short-term financial obligation. This is also used to determine whether the organization will be able to meet any unexpected financial need for cash.…

    • 757 Words
    • 4 Pages
    Better Essays
    Read More
  • Powerful Essays

    Ratio Analysis Memo (Riordan Manufacturing)
    • 1990 Words
    • 8 Pages

    Ratio Analysis Memo (Riordan Manufacturing)

    Another area that the company had a slight growth in is the total assets for the company. Riordan had growth in their total assets by just over 2%. An abundant amount of this growth was because the company’s investment in tangible assets such as…

    • 1990 Words
    • 8 Pages
    Powerful Essays
    Read More
  • Powerful Essays

    Short Term 531 Week 1 Quiz
    • 2106 Words
    • 9 Pages

    Short Term 531 Week 1 Quiz

    Long-term Solvency Ratio: A) Total Debt Ratio = Total Debt (Current Liabilities + Long term Liabilities) / Total Assets, B) Debt-Equity Ratio = Total Debt / Total Equity, C) Equity Multiplier = Total Assets / Total Equity, D) Times Interest Earned = EBIT (Earnings Before Interest & Tax) / Interest Expense, E) Cash Coverage Ratio = (EBIT + Depreciation) / Interest Expense…

    • 2106 Words
    • 9 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Btec Business Unit 7 D2
    • 692 Words
    • 3 Pages

    Btec Business Unit 7 D2

    Financial ratios asses, any aspect of the business, and is an integral part in the financial statement analysis of the business. Liquidity Ratios measures the ability of a company to pay off it short term debt. This helps the business assess whether it has sufficient cash or asset equivalent to be able to pay off it short term debt in due cause.…

    • 692 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Fnt Task 1
    • 1124 Words
    • 3 Pages

    Fnt Task 1

    “Current Ratio” measures the ability to pay current liabilities with current assets. The current assets divided by current liabilities. In 2011 the current ratio was 1.86. By 2012, it decreased to 1.79 rating in the lower second quartile group in the industry. Company G’s ability to repay its debt is consistent with showing a weakness from year to year based on the industry’s quartiles of 3.1 with a strong ability to cover liabilities 2.1median to 1.4 stating an weakness.…

    • 1124 Words
    • 3 Pages
    Good Essays
    Read More
  • Better Essays

    MBA733 Chipotle Presentation
    • 863 Words
    • 17 Pages

    MBA733 Chipotle Presentation

    “There is no secret menu, employees are required to make whatever you order from their…

    • 863 Words
    • 17 Pages
    Better Essays
    Read More
  • Satisfactory Essays

    Ratio Analysis
    • 374 Words
    • 2 Pages

    Ratio Analysis

    The liquidity ratio of a company shows the way the company is able to pay back short-term debt that is owed. Creditors would be interested in this type of ratio. The profitability ratios are the profit performance that makes up the financial success of the company. Profitability ratios would be beneficial to individuals outside of the company such as investors and creditors. Solvency ratios are the ability of the company to pay off the long-term debt. The company’s solvency ratios are of interest to long-term creditors and the company’s’ shareholders. Shareholders and long-term creditors would be most interested in solvency ratios of the company.…

    • 374 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Case Study 3
    • 711 Words
    • 3 Pages

    Case Study 3

    4. If GearUp were to use FBA, what business procedures would it not need to develop? What costs would it save?…

    • 711 Words
    • 3 Pages
    Good Essays
    Read More
  • Powerful Essays

    Case Study
    • 890 Words
    • 3 Pages

    Case Study

    It increased from 2004 to 2005 by .04 and then it again decreased by .04. Debt to total assets shows the relationship between the debt and total assets. This ratio shows the % by how much the assets are financed by the debts. This ratio declined slightly in 2005 and then increased slightly from 2006.…

    • 890 Words
    • 3 Pages
    Powerful Essays
    Read More
  • Good Essays

    Methuselah Character Analysis
    • 799 Words
    • 4 Pages

    Methuselah Character Analysis

    Methuselah is, according to the Bible, the oldest human to ever walk the face of this planet. With a lifespan of 969 years, his family is also mentioned as inheriting his traits of longevity, with his descendants mostly living for 800 to 900 years. With his long life span, Methuselah is also used as a symbol of wisdom and although is portrayed as having lots of knowledge, never plays a very prominent role in the bible.…

    • 799 Words
    • 4 Pages
    Good Essays
    Read More
  • Powerful Essays

    Migration in the 19th Century
    • 5601 Words
    • 23 Pages

    Migration in the 19th Century

    Emigration was directly linked to the situation in the country of origin. Especially from 1820 onwards Malta had formidable problems with redundant population. Peace in the country developed occupancies, which led to unemployment throughout the country. Although the country was afflicted by several diseases like the plague in 1813 and cholera this did little to curb the unstoppable growth in population.…

    • 5601 Words
    • 23 Pages
    Powerful Essays
    Read More
  • Good Essays

    Premier Furniture Case
    • 613 Words
    • 3 Pages

    Premier Furniture Case

    The current ratio captures the short-term liquidity of the firm and since debt payments are ultimately made from cash, the current ratio measures the extent to which current assets are available to make payments. Designers’ current ratios are as follows: 2.3964 in 1982, 2.2772 in 1983, and 2.7016 in 1984; whereas Walcott’s are: 1.3921 in 1983 and 1.4594 in 1984. Designers’ seems to be a more short-term liquid company which is an appealing factor when dealing with credit…

    • 613 Words
    • 3 Pages
    Good Essays
    Read More

Related Topics