Ratio - Edubook - Multiple choice questions

5 important questions on Ratio - Edubook - Multiple choice questions

The profit of a business amounts to € 159,000 after deduction of interest. The average interest rate is 4.9%. The size of the debts for which a compensation must be paid amounts to € 7,361,000. What is the interest coverage ratio?

1.44
Interest: € 7,361,000 × 4.9% = € 360,689

Operating result: € 159,000 + € 360,689 = € 519,689

Interest coverage ratio: € 519,689 / € 360,689 = 1.44

A business has € 2,400,000 of assets. Two third of these consist of fixed assets. Half of the current assets consists of stock. A quarter of the assets is financed with equity. The current debts amount to € 450,000. What is the net working capital?

+ euro 350,000

What will happen in the long term with the return on assets if a loan, for which interest must be paid, is redeemed with money that is contributed to the business by the business owners? The rest remains the same.


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Which of the measures below will increase the financial resilience of a company?

  • A loan from an investor is subordinated to provide the bank with a higher security interest.

  • An overdraft facility at the bank (11%) is converted into a loan (6%).
  • The costs are reduced while the turnover remains the same.

As of 31 December year 1, the following has been provided for company Maksimi:
- The net working capital is - € 14,200 (so negative);
- The current assets have a value of € 83,800;
- The quick ratio is 0.25.

What is the value of inventories as at 31 December year 1?

€ 59,300

Net working capital = current assets - current liabilities - € 14,200 = € 83,800 + current liabilities =
Current liabilities = € 98,000
Quick ratio = (Current assets - inventories) / current liabilities
0.25 = (€ 83,800 - inventories) / € 98,000
0.25 × € 98,000 = € 83,800 - inventories =
€ 24,500 = € 83,800 - inventories
Inventories = € 83,800 - € 24,500 = € 59,300

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