Question
Using the same balance sheet data (Equity 40, Reserves 20, Term Loan 60, Current Liabilities 40), the bank wants to evaluate the long‑term solvency position of the borrower. Total Outside Liabilities include term loan and current liabilities. What is the TOL/TNW ratio?
Solution
TOL = 60 + 40 = 100. TNW = 40 + 20 = 60. Ratio = 100 / 60 = 1.67.
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