Solvency Ratios: Creditors will know if a company will be able to pay maturing debt and

interest by reviewing the solvency ratios debt to total assets ratio and times interest earned. 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. Income before income taxes and interest expense
divided by interest expense is the times interest earned. 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.
Debt to total assets ratio = total liabilities/total assets
2009 2008
$462,153/5$588,767=78% $213,450/$548,535=39%
The debt total assets changed by 39% from 2008 to 2009 which indicates that Patton-Fuller
Community Hospital is stable and able to pay their creditors.