Question

From the following information, calculate:

1. Current ratio and
2. Debt to capital employed ratio

Information	(₹)
Total Assets	6,00,000
Non-Current Liabilities	1,40,000
Shareholders’ Funds	4,20,000
Non-current Assets	5,20,000

Answer 1

(i) Current eatio:

Current Ratio = `"Current assets"/"Current liabilities"`

= `(80,000)/40,000`

= 2 : 1

(ii) Debt to capital employed ratio:

= `"Debt (Non-current liabilities)"/"Capital Employed"`

= `(1,40,000)/(5,60,000)`

= 0.25 : 1

Working Note:

1. Current assets:

Current assets = Total assets − Non-current assets

= 6,00,000 − 5,20,000

= 80,000

2. Current liabilities:

Current liabilities = Total assets − (Shareholders’ funds + Non-current liabilities)

= 6,00,000 − (4,20,000 + 1,40,000)

= 6,00,000 − 5,60,000

= 40,000

3. Capital Employed:

Capital employed = Shareholders’ funds + Non-current Liabilities

= 4,20,000 + 1,40,000

= 5,60,000