Question

Calculate the Debt to Capital Employed Ratio from the following information:

Particulars	₹	₹
Shareholders’ Funds		50,00,000
Non-current Liabilities:
Long-term Borrowings	20,00,000
Long-term Provisions	17,50,000	37,50,000
Non-current Assets:
Property, Plant and Equipment and Intangible Assets	90,00,000
Non-current Investments	12,50,000	1,02,50,000
Current Assets		23,75,000

Answer 1

Calculation of Debt (Long-term Debt):

\[\text{Debt} = \text{Long-term Borrowings} + \text{Long-term Provisions}\]

$$\text{Debt} = ₹ 20,00,000 + ₹ 17,50,000$$

$${\text{Debt} = ₹ 37,50,000}$$

Calculation of Capital Employed:

$$\text{Capital Employed} = \text{Shareholders' Funds} + \text{Debt}$$

$$\text{Capital Employed} = ₹ 50,00,000 + ₹ 37,50,000$$

$${\text{Capital Employed} = ₹ 87,50,000}$$

Calculation of Debt to Capital Employed Ratio:

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

$$\text{Debt to Capital Employed Ratio} = \frac{37,50,000}{87,50,000} = \frac{375}{875} \approx 0.4285$$

Debt to Capital Employed Ratio = 0.43 : 1