BOI Credit Officer Practice Questions - Bank Of India Credit Officer (GBO Stream MMGS-II) Exam

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If a borrower's Balance Sheet shows Total Debt of ₹800 lakhs and Tangible Net Worth of ₹400 lakhs, what is the Debt-Equity Ratio, and what does a high ratio generally indicate to a credit officer?

0.50; indicates low financial risk and high solvency. 2.00; indicates high leverage and higher financial risk to creditors. 1.50; indicates balanced gearing and moderate leverage. 2.50; indicates extremely high equity funding relative to debt.

Correct Answer:

2.00; indicates high leverage and higher financial risk to creditors.

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