Solvency Ratios: The solvency ratios debt to total assets ratio and times interest earned tells

creditors if a company will be able to pay maturing debt and interest. Total liabilities divided by
total assets is the debt to total assets ratio. Creditors will determine if a company can pay the
maturing debt by the lower the percentage of the debt total assets ratio the more likely it will be
able to pay its debts. The times interest earned is income before income taxes and interest
expense divided by interest expense. The result of this ratio will tell creditors and investors the
companys ability to pay interest as it comes due. The higher the result of times interest earned
the easier it is for the company to pay their interest