Assertion (A): Debt-equity ratio indicates the long-term solvency of a company. Reason (R): It measures the ability of the company to pay-off its long-term liabilities. Select the correct answer.

The correct answer is: A. Both (A) and (R) are correct, and (R) is the correct reason for (A).

Debt-equity ratio is a measure of a company’s financial leverage, which is the extent to which a company uses debt to finance its assets. A high debt-equity ratio indicates that a company is using a lot of debt to finance its assets, which can be risky if the company is unable to repay its debt.

The ability of a company to pay off its long-term liabilities is a measure of its long-term solvency. A company with a high debt-equity ratio may have difficulty paying off its long-term liabilities if it experiences financial difficulties.

Therefore, both (A) and (R) are correct, and (R) is the correct reason for (A).