Ramit is using ICR (Interest Coverage Ratio) as the indicator of the interest
paying capacity of his company. However one of his old school days? friends
Shobhit tells him to use DSCR (Debt Service Coverage Ratio) as the indicator
to judge it.
Do you agree with his friend?
Give reason for your answer.
OR
Raghu has started a mobile manufacturing company. The company has decided
to meet the competitor?s market hold by giving liberal credit terms to their
customers. They have decided to check the creditworthiness of their customers
before giving them this facility. They will provide this facility to customers
having credit cards.
1. Predict the fixed capital requirement of Raghu?s company.
2. What do you think will be the working capital requirement of his
company?
Dear Student,'
Here is your answer of Ist query:
For rest of the query kindly post in separate thread for rapid assistance:
Regards.
Here is your answer of Ist query:
Yes we agree because interest coverage ratio does not consider all the components of debt such as preference dividend and non cash expenses
using DSCR will enable Ram to determine the exact capacity of his company to pay off debts and also about the liquidity and cash flow position of his company
For rest of the query kindly post in separate thread for rapid assistance:
Regards.