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      Question

      Using the same balance sheet data (Equity 40, Reserves

      20, Term Loan 60, Current Liabilities 40), the bank wants to evaluate the longโ€‘term solvency position of the borrower. Total Outside Liabilities include term loan and current liabilities. What is the TOL/TNW ratio?
      A 1.50 Correct Answer Incorrect Answer
      B 1.67 Correct Answer Incorrect Answer
      C 2.00 Correct Answer Incorrect Answer
      D 2.50 Correct Answer Incorrect Answer
      E 3.00 Correct Answer Incorrect Answer

      Solution

      TOL = 60 + 40 = 100. TNW = 40 + 20 = 60. Ratio = 100 / 60 = 1.67.

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