question_answer

From the following balance sheet, calculate the given ratios.

(i) Debt equity ratio

(ii) Proprietary ratio

(iii) Total assets to debt ratio

Balance Sheet as at 31st March, 2017

	Particulars	31st March, 2017 Amt (Rs.)
I.	EQUITY AND LIABILITIES
	1. Shareholders' Funds
	(a) Equity Share Capital	45,00,000
	(b) Reserves and Surplus	9,00,000
	2. Non-current Liabilities
	Long-term Borrowings	27,00,000
	3. Current Liabilities
	(a) Short-term Borrowings	6,00,000
	(b) Trade Payables	33,00,000
	Total	1,20,00,000
II.	ASSETS
	1. Non-current Assets
	(a) Fixed Assets: Tangible Assets	49,50,000
	(b) Long-term Investments	4,80,000
	2 Current Assets
	(a) Inventories	27,30,000
	(b) Trade Receivables	37,20,000
	(c) Cash and Cash Equivalents	1,20,000
	Total	1,20,00,000

Answer:

(i) Debt Equity Ratio \[=\frac{\text{Long}-\text{term}\,\text{Debts}*}{\text{Shareholders }\!\!'\!\!\text{ }\,\text{Funds}**}=\frac{27,00,000}{54,00,000}=0.5:1\] *Long-term Debts = Long-term Borrowings = Rs. 27,00,000 *Shareholders' Funds = Equity Share Capital + Reserves and Surplus = 45,00,000 + 9,00,000 = Rs. 54,00,000 (ii) Proprietary Ratio \[=\frac{\text{Shareholders }\!\!'\!\!\text{ }\,\text{Funds}}{\text{Total}\,\text{Assets}}=\frac{54,00,000}{1,20,00,000}=0.45:1\] (iii) Total Assets to Debt Ratio \[=\frac{\text{Total}\,\text{Assets}}{\text{Long}-\text{term}\,\text{Debts}}=\frac{1,20,00,000}{27,00,000}=4.4:1\]