Question

Calculate ‘Total Assets to Debt ratio’ from the following information:

	₹
Equity Share Capital	4,00,000
Long Term Borrowings	1,80,000
Surplus i.e. Balance in statement of Profit and Loss	1,00,000
General Reserve	70,000
Current Liabilities	30,000
Long Term Provisions	1,20,000

Hints:

1. Total Assets = Total Liabilities = Equity Share Capital + Long-term Borrowings + Surplus, i.e., Balance in Statement of Profit & Loss + General Reserve + Current Liabilities + Long-term Provisions = 9,00,000.
2. Debt = Long-term Borrowings + Long-term Provisions = ₹ 3,00,000.

Answer 1

Total Assets = Total Liabilities

Total Assets = Equity Share Capital + Long-term Borrowings + Surplus i.e. Balance of statement of Profit and Loss + General Reserves + Long term provisions + Current Liabilities

Total Assets = ₹ (4,00,000 + 1,80,000 + 1,00,000 + 70,000 + 30,000 + 1,20,000)
Total Assest = ₹ 9,00,000

Long-term Debt = Long-term Borrowings + Long-term provisions = ₹ (1,80,000 + 1,20,000) = ₹ 3,00,000

Total Assets to Debt Ratio = `"Total Assets"/"Long-term debt"`

= `(9,00,000)/(3,00,000)` = 3: 1.