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Question
Calculate proprietary ratio on the basis of following particulars:
| ₹ | |
| Non-Current Assets | 5,00,000 |
| Current Assets | 3,00,000 |
| Equity Share Capital | 0.4 times of total assets |
| Preference Share Capital | 0.25 times of Equity Share Capital |
| General Reserve | 1,50,000 |
| Net Profit before Tax | 1,20,000 |
| Tax Rate | 25% |
Numerical
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Solution
Proprietary Ratio = `"Shareholder’s Funds"/"Total Assets"`
Total Assets = Non-Current Assets + Current Assets
= ₹ 5,00,000 + ₹ 3,00,000
= ₹ 8,00,000
Equity Share Capital = 0.4 × ₹ 8,00,000
= ₹ 3,20,000
Preference Share Capital = 0.25 × ₹ 3,20,000
= ₹ 8,00,000
Net Profit after Tax = ₹ 1,20,000 − ₹ 1,20,000 × `25/100`
= ₹ 1,20,000 − ₹ 30,000
= ₹ 90,000
Shareholder’s Funds = Equity Share Capital + Preference Share Capital + General Reserve + Net Profit after Tax
= ₹ 3,20,000 + ₹ 80,000 + ₹ 1,50,000 + ₹ 90,000
= ₹ 6,40,000
Proprietary Ratio = `(₹ 6,40,000)/(₹ 8,00,000)`
= 0.8 : 1
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