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Question
Compute Debt to Total Assets Ratio from the following information:
| ₹ | ₹ | ||
| Total Assets | 35,00,000 | Bills Payables | 20,000 |
| Total Debts | 32,00,000 | Short-term Borrowings | 1,00,000 |
| Creditors | 2,50,000 | Outstanding Expenses | 30,000 |
Numerical
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Solution
Debt to Total Assets Ratio = `"Long term Debt"/"Total Assets"`
Long-term Debt = Total Debts − Creditors − Bills Payables − Short-term Borrowings − Outstanding Expenses
= ₹ 32,00,000 − ₹ 2,50,000 − ₹ 20,000 − ₹ 1,00,000 − ₹ 30,000
= ₹ 28,00,000
Total Assets = ₹ 35,00,000
Debt to Total Assets Ratio = `(₹ 28,00,000)/(₹ 35,00,000)`
= 0.8 : 1
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