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Total Indebtedness Ratio

 

Hi Geeks ,

Learned about this new ratio.

Thought of sharing,so….

This ratio takes into consideration the total term liabilities as well as current liabilities into consideration and hence better indicator of solvency of the  concern.

Higher ratio would indicate excessive dependence on outside funds and may be considered as a negative factor.
Total Indebtedness Ratio = Total Outside Liabilities/ Tangible Net Worth

Ideal value : 3.5 : 1

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