TOL / TNW Formula:
|TOL/ TNW Ratio Formula|
This ratio measures the total leverage employed by the business; meaning that the firm has used its net worth as a lever to raise outside funds.
Too much of leverage is not good as it may pose a problem for the organisation to repay the obligations during periods of stress.
|TOL/ TNW Example of NMDC Ltd.|
TOL/ TNW shall be less than 3 - meaning that a business can have total outside liabilities of a maximum of three times its tangible net worth. Lower number means more safety and a higher number means weakness.
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