Practice Solvency Ratios (1.4.2) - Ratio Analysis

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8 questions

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6 sample questions

Question 1.
What is the formula for the Debt-Equity Ratio?
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Look for the relationship between equity and debt.
Question 2.
What does a high Interest Coverage Ratio indicate?
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Think about the company's ability to meet its interest obligations.
3Question 3.
What does the Debt-Equity Ratio measure?
- Liquidity
- Financial leverage
- Profitability
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Consider how a company funds its operations.
4Question 4.
True or False: A higher Interest Coverage Ratio is considered better.
- True
- False
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Think about financial obligation management.
Question 5.
A company has Total Assets of ₹500,000 and Long-Term Debt of ₹200,000. Calculate the Total Assets to Debt Ratio and interpret the result.
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Think about how many times total assets can cover the debt.
Question 6.
If a firm has EBIT of ₹300,000 and interest of ₹100,000, calculate the Interest Coverage Ratio and explain what that means for the firm.
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Relate this to the ability to handle financial obligations.

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