Solvency is a firms ability to survive in the long

4. Solvency is a firm’s ability to survive in the long -term by paying its long-term obligations. Its key ingredients are
capital structure and earning power. Capital structure consists of:
a. The capital stocks of the firm
b. The firm’s total assets
c. The firm’s sources of financing, whether long-term or short-term, of its assets
d. The stockholders’ equity accounts
5. Financial leverage or trading on equity is advantageous when:
6. Through financial statement analysis, interested parties — such as managers, investors, and creditors — can identify
the company’s financial strengths and weaknesses and know about the following except: