Question

From the following information, calculate:

1. Debt-Equity Ratio and
2. Total Assets to Debt ratio

Information	(₹)
Long-term borrowings	8,00,000
Other long-term liabilities	80,000
Long-term provisions	1,20,000
Share capital	24,00,000
Reserves and Surplus	6,00,000
Non-current Assets	36,00,000
Current Assets	14,00,000
Current Liabilities	10,00,000

Answer 1

(i) Debt-Equity ratio:

Debt-Equity ratio = `"Debt"/"Equity"`

= `(10,00,000)/(30,00,000)`

= `1 : 3`

(ii) Total assets to debt ratio:

Total assets to debt ratio = `"Total assets"/"Debt"`

= `(50,00,000)/(10,00,000)`

= 5 : 1

Working note:

1. Debt (Long-term Liabilities):

Debt = Long-term borrowings + Other long-term liabilities + Long-term provisions

= 8,00,000 + 80,000 + 1,20, 000

= 10,00, 000

2. Equity (Shareholders’ Funds):

Equity = Share capital + Reserves and Surplus

= 24,00,000 + 6,00,000

= 30, 00,000

3. Total Assets:

Total Assets = Non-current Assets + Current Assets

= 36,00, 000 + 14, 00,000

= 50,00, 000