ANALYZING DEBT                                           

Debt ratio measure the proportion of total assets financed by firm’s creditors. The debt ratio of IDLC indicates the more than 84% & 69% of the total asset of IDLC has been financed by creditors in 1997 & 1998 respectively. The higher this ratio, the greater the firms degree of indebtedness and the more financial levarage  it has. Moreover the debt ratio has been decreased in 1998, this could be a signal to increased the creditors as or reduced  the firm’s total assets.

The debt  ratio of ULC indicates  the more than around 75% of his assets has been financed by creditors and a little bit increased in 1998 to 1997.

Debt Ratio:

IDLC                                                      1997                        1998  
   Total  liabilities                             1,725,056,116           1,425,467,974
   Total  assets                                 2,050,904,961           2,075,899,918
   Debt ratio                                             0.84                           0.69

ULC           
   Total liabilities                               48,925,4707                 563,090,300
   Total assets                                  1,324,002,652               563,348,607
   Debts ratio                                         0.36                                0.37

 Though  it is lower than IDLC. But also higher financial levarage it has.

 Times Interest Earned Ratio:

IDLC:                                                            1997                      1998

  Earning before int. and taxes                   112,662,821         100,719220
  Interest                                                   103,045,930         116,527,546
  Time interest earned                                      1.09                      0.86

ULC

   Earning before int. and taxes                 78,864,232           104,146,107
   Interest                                                 70,343,163           80,575,713
   Time interest earned                                 1.12                       1.29

Time int. earned ratio measures the firm’s ability to make interest  payment. The ratio of IDLC indicates the poor ability to make interest payment. Lower the IDLC’s ratio, the greater the risk to both lenders  and owners.

This ratio of ULC indicates the poor ability to make int. payment as a rule, a value of at least 3.0 preferably closer to 5.0 is suggested. So lower the ULC’s  ratio, the greater  the risk to both lenders and owners.

To compare with the ULC’s the ratio of IDLC is lower.