Question

Calculate Debt to Capital Employed Ratio from the following information:

Total Debts ₹ 60,00,000; Current Assets ₹ 25,00,000; Non-Current Assets ₹ 95,00,000; Working Capital ₹ 5,00,000.

Answer 1

Calculation of Current Liabilities:

\[\text{Current Liabilities} = \text{Current Assets} - \text{Working Capital}\]

$$\text{Current Liabilities} = ₹ 25,00,000 - ₹ 5,00,000$$

$${\text{Current Liabilities} = ₹ 20,00,000}$$

Calculation of Debt (Long-term Debt):

$$\text{Debt} = \text{Total Debts} - \text{Current Liabilities}$$

$$\text{Debt} = ₹ 60,00,000 - ₹ 20,00,000$$

$${\text{Debt} = ₹ 40,00,000}$$

Calculation of Capital Employed:

$$\text{Total Assets} = \text{Non-Current Assets} + \text{Current Assets}$$

$$\text{Total Assets} = ₹ 95,00,000 + ₹ 25,00,000 = ₹ 1,20,00,000$$

$$\text{Capital Employed} = \text{Total Assets} - \text{Current Liabilities}$$

$$\text{Capital Employed} = ₹ 1,20,00,000 - ₹ 20,00,000$$

$${\text{Capital Employed} = ₹ 1,00,00,000}$$

Calculation of Debt to Capital Employed Ratio:

$$\text{Debt to Capital Employed Ratio} = \frac{\text{Debt}}{\text{Capital Employed}}$$

$$\text{Debt to Capital Employed Ratio} = \frac{40,00,000}{1,00,00,000} = 0.4$$

Debt to Capital Employed Ratio = 0.4 : 1