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Question
Calculate Debt to Total Assets Ratio from the following information:
| ₹ | ₹ | ||
| Shareholder’s Funds | 32,00,000 | Total Debts | 24,00,000 |
| Reserve and Surplus | 12,00,000 | Trade Payables | 5,60,000 |
| Bank Overdraft | 40,000 |
Numerical
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Solution
Debt to Total Assets Ratio = `"Long term Debts"/"Total Assets"`
Long-term Debts = Total Debts − Trade Payables − Bank Overdraft
= ₹ 24,00,000 − ₹ 5,60,000 − ₹ 40,000
= ₹ 18,00,000
Total Assets = Shareholder’s Funds + Total Debts
= ₹ 32,00,000 + ₹ 24,00,000
= ₹ 56,00,000
Debt to Total Assets Ratio = `(₹ 18,00,000)/(₹ 56,00,000)`
= 0.32 : 1
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