Question

36. You are evaluating the solvency and liquidity of XYZ Co. in light of the following information: FY 2017 FY 2016 FY 2015 Total Debt $2000 $1900 $1750 Total Equity $4000 $4500 $5000. Your MOST LIKELY conclusion is that:

a. The company is becoming less solvent
b. The company is becoming less liquid
c. The company is becoming more solvent
d. The company is becoming more liquid

Answer 1

C) The company is becoming more solvent

Step-by-step explanation:

FY 2017 FY 2016 FY 2015

Total Debt $2000 $1900 $1750

Total Equity $4000 $4500 $5000

debt to equity 50% 42% 35%

Since the debt to equity ratio is continuously decreasing, we can conclude that XYZ Co. is financially stable and becoming more solvent.