NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Evaluating the Financial Position of Clients
Meena Iyer has total assets of Rs 80 lakh and total liabilities of Rs 20 lakh. Her annual gross income is Rs 15 lakh, annual savings are Rs 3 lakh, and annual EMI payments are Rs 4.5 lakh. What are her solvency ratio (net worth to total assets) and debt service ratio respectively?
Net worth is Rs 60 lakh, so the solvency ratio is 60/80, or 75%. The debt service ratio is annual EMIs of Rs 4.5 lakh over gross income of Rs 15 lakh, which is 30%. Both use the stated definitions.
- A75% and 30%Correct
- B25% and 30%
- C75% and 20%
- D60% and 30%
Explanation
Net worth = 80 - 20 = Rs 60 lakh; solvency ratio = 60/80 = 75%. Debt service ratio = 4.5/15 = 30%. The 25% option uses liabilities/assets instead of net worth; 20% uses savings/income, and 60% is the net worth in lakh, not a ratio.
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