Question

Match List I with List II

LIST I	LIST II
A. Fixed capital	II. Investment in non-current assets
B. Working capital	III. Investment in current assets
C. Interest coverage ratio	I. EBIT/interest
D. Financial leverage	IV. Proportion of debt in the capital structure

• A. A-I, B-IV, C-III, D-II
• B. A-II, B-III, C-I, D-IV
• C. A-III, B-II, C-IV, D-I
• D. A-IV, B-II, C-III, D-I

Hint:

In financial analysis, it's crucial to understand how different financial metrics and ratios are linked with various business operations, including capital structure and asset investment.

Answer 1

The Correct Option is A

- Fixed capital (A) is related to EBIT/interest (I), as it refers to long-term investments.
- Working capital (B) is connected with the proportion of debt in the capital structure (IV), which deals with short-term assets and liabilities.
- Interest coverage ratio (C) is related to investment in current assets (III), as it evaluates the company's ability to cover its interest expenses.
- Financial leverage (D) deals with the proportion of debt in the capital structure (II), indicating how much debt is used in the financing of the company.