
Explanation:
Solvency ratios measure a company's ability to meet its long-term obligations and continue operations over the long term. They assess the company's financial leverage and ability to pay interest and principal on debt.
Analysis of each option:
Quick ratio (Option A) - This is a liquidity ratio, not a solvency ratio. It measures a company's ability to meet short-term obligations using its most liquid assets (cash, marketable securities, and receivables).
Current ratio (Option B) - This is also a liquidity ratio. It measures a company's ability to pay short-term obligations using current assets.
Interest coverage ratio (Option C) - This is a solvency ratio. It measures a company's ability to pay interest expenses on outstanding debt. It's calculated as:
A higher ratio indicates better ability to meet interest obligations.
Other common solvency ratios include:
Conclusion: Among the given options, the interest coverage ratio is the only one that measures solvency rather than liquidity.
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