Mathematics · Financial Ratio Analysis
A bank analyzes the financial statements of a corporate client with Current Assets = ₹500 Crore (including Inventory = ₹200 Crore), Current Liabilities = ₹250 Crore, Total Debt = ₹600 Crore, Tangible Net Worth = ₹300 Crore, Profit Before Interest and Tax (PBIT) = ₹120 Crore, and Interest Expense = ₹40 Crore. Calculate Current Ratio (CR), Quick Ratio (QR), Debt-Equity Ratio (DER), and Interest Coverage Ratio (ICR), and assess the financial risk.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1CR: 2.0; QR: 1.2; DER: 2.0; ICR: 3.0. Good liquidity, but moderate leverage risk due to high DER.✓
- 2CR: 1.5; QR: 0.8; DER: 2.5; ICR: 1.5. Financial position is weak.
- 3CR: 2.5; QR: 1.5; DER: 3.0; ICR: 2.0. Financial position is weak.
- 4CR: 2.0; QR: 1.2; DER: 2.0; ICR: 3.0. Financial position is completely risk-free.
Correct answer
CR: 2.0; QR: 1.2; DER: 2.0; ICR: 3.0. Good liquidity, but moderate leverage risk due to high DER.
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