General Studies · Ratio Analysis
BlueWater Shipping Corp. reveals Current Assets = ₹80 Million, Current Liabilities = ₹50 Million, Total Debt = ₹120 Million, Net Block (Fixed Assets) = ₹200 Million, Revenue = ₹300 Million, and Total Equity = ₹100 Million. The shipping sector average Fixed Asset Turnover is 2.0 times, and the standard Debt-Equity Ratio is 1:1. Calculate the company's Fixed Asset Turnover Ratio and Debt-Equity Ratio and evaluate the management's claim of peak performance and optimal leverage.
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Fixed Asset Turnover = 2.0, Debt-Equity = 1.0; Both claims are true and exactly at industry norms.
- 2Fixed Asset Turnover = 1.5, Debt-Equity = 0.8; Utilization is poor, but leverage is safe.
- 3Fixed Asset Turnover = 2.5, Debt-Equity = 0.8; Both claims are true.
- 4Fixed Asset Turnover = 1.5, Debt-Equity = 1.2; Both claims are false as the firm is under-utilizing assets and is over-leveraged compared to the industry.✓
Correct answer
Fixed Asset Turnover = 1.5, Debt-Equity = 1.2; Both claims are false as the firm is under-utilizing assets and is over-leveraged compared to the industry.
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