Case Study. Use the case in the picture below and answer all the questions.

1. What is fixed interest debt proportion for 20X6?

a. 60 %

b. 43 %

c. 100 %

d. 75 %

2. What is fixed interest debt proportion for 20X7?

a. 43 %

b. 59 %

c. 55 %

d. 39 %

e. 100 %

3. How much Orwo Co shall pay total fixed interest payments for 20X6?

a. 194,000

b. 199,000

c. 94,000

d. 81,000

e. 10 %

4. How much is variable interest payment for 20X6?

a. 80,000

b. 84,000

c. 160,000

d. 161,000

e. 800,000

5. How much is variable interest payment for 20X7?

a. 161,000

b. 160,000

c. 80,000

d. 800,000

e. 126,000

6. Interest coverage ratio for 20X6 is:

a. 10.7

b. 9.6

c. 8.5

d. 7.4

e. 6.4

7. Interest coverage ratio for 20X7 is:

a. 8.4

b. 10.7

c. 100 %

d. 8.4

e. 7.4

8. Debt/equity ratio for 20X6 is:

a. 21 %

b. 20 %

c. 18 %

d. 15 %

e. 33 %

9. Debt/equity ratio for 20X7 is:

a. 21 %

b. 20 %

c. 18 %

d. 15 %

e. 33 %

10. Total debt/equity ratio for 20X7 is:

a. 45 %

b. 41 %

c. 20 %

d. 21 %

e. 66 %

Case Study "Orwo Co" ORWO COMPANY FINANCE AND RISK MANAGEMENT The following financial information related to Orwo Company (in euros): 20x7 20X6 INCOME STATEMENT Sales, all on credit 37 400 000 26 720 000 Cost of sales 34 408 000 23 781 000 Operating profit 2 992 000 2 939 000 Finance costs (interest payments) 355 000 274 000 Profit before taxation 2 637 000 2 665 000 BALANCE Non-current assets 11 207 000 10 325 000 Current assets Inventory 4 600 000 2 400 000 Trade receivables 4 600 000 2 200 000 Total current assets 9 200 000 4 600 000 Total Assets 20 407 000 14 925 000 Current liabilities Trade payables 4750 000 2 000 000 Overdraft 3 225 000 1 600 000 Total current liabilities 7 975 000 3 600 000 Long-term liabilities 8% Bonds 2 425 000 2 425 000 Total liabilities 10 400 000 6 025 000 Capital and reserves Share capital 6432 000 5 325 000 Reserves 6 000 000 6 000 000 Total capital 12 432 000 11 325 000 Total liabilities and capital 20 407 000 14 925 000 The average variable overdraft interest rate in each year was 5%. The 8% bonds are redeemable in ten years' time. You need to answer Q1 - Q10! (Go to Ortus 5.CRPQ Individual Assignment!) You are required: Discuss and answer with supporting calculations, the possible effects on Orwo Co of an increase in interest rates and advise the company of steps it can take to protect itself against interest rate risk