Answer: Interest coverage ratio exclusively

**Explanation:** The **interest coverage ratio** measures a company's ability to meet its interest obligations from operating earnings. A higher ratio indicates improved solvency. For the given data: - **Year 1:** Interest coverage ratio = EBIT / Interest payments = 40 / 8 = 5 - **Year 2:** Interest coverage ratio = 35 / 5 = 7 The increase from 5 to 7 demonstrates stronger solvency. On the other hand, the **financial leverage ratio** (total assets / shareholders' equity) reflects the degree of leverage. A higher ratio suggests increased leverage and weaker solvency: - **Year 1:** Financial leverage ratio = 450 / 120 ≈ 3.75 - **Year 2:** Financial leverage ratio = 500 / 100 = 5 Thus, only the interest coverage ratio indicates improved solvency, making **Option A** the correct choice.

Author: LeetQuiz Editorial Team