As the manager of a financial services company, you have received a proposal seeking a term loan of `300 lakh, from a firm planning an investment in fixed assets of `500 lakh in a new project. The loan is indicated to be repayable in three annual instalments commencing from the end of the second year. The following information concerning the project is available:
Assuming other techno-economic criteria to be satisfactory, you are required to:
(a) compute appropriate financial ratio which, in your opinion, would guide the financing decision, and
(b) interpret briefly the ratio so computed and give your views on the proposal.
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