Question

If Tangible net worth of a firm is 25% of Total assets,What is TOL/TNW
1. 4:1
2. 3:1
3. 2:5:1
4. None of these

Answer 1

The answer here would be option 1. given in the answer choices or 4:1.

Explanation:

• In the TOL/TNW formula, the TOL stands for the total or overall libailities of a company or a business organization and the TNW denotes the total net worth of the company or organization.
• The TOL/TNW ratio shows the evaluation of the overall financial liquidity or leverage of any company or organization which is computed by dividing the total or overall liabilities incurred by the total net worth of the company.
• Therefore,in this case,if the total net worth is 25% of the total or overall liabilities then it implies that the TOL/TNW would be 4:1 or the total or overall liabilities is 4 times the total net worth.