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    Question

    A project proposes Debt of ₹140 crore and Equity

    (including reserves) of ₹60 crore. The industry norm allows maximum Debt–Equity of 2:1. What is the credit implication?
    A Structure is comfortable Correct Answer Incorrect Answer
    B Slightly conservative Correct Answer Incorrect Answer
    C Within permissible limits Correct Answer Incorrect Answer
    D Over-leveraged, needs more equity Correct Answer Incorrect Answer
    E Reject the proposal Correct Answer Incorrect Answer

    Solution

    Debt–Equity = 140 / 60 = 2.33 : 1 Above norm of 2:1 → additional equity required

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