Question

Following particulars are extracted from the books of Bharat Rubber Ltd.:

	₹
Share Capital	3,20,000
General Reserve	1,00,000
Profit & Loss Balance	48,000
9% Debentures	1,20,000
Current Liabilities	3,04,000

You are required to work out the following ratios:

1. Debt-Equity Ratio
2. Debt to Total Assets Ratio
3. Proprietary Ratio

Answer 1

(i) Debt Equity Ratio = `"Long term Debts"/"Shareholder’s Funds"`

Long term Debts = 9% Debentures

= ₹ 1,20,000

Shareholder’s Funds = Share Capital + General Reserve + Profit & Loss Balance

= ₹ 3,20,000 + ₹ 1,00,000 + ₹ 48,000

= ₹ 4,68,000

Debt Equity Ratio = `(₹ 1,20,000)/(₹ 4,68,000)`

= 0.26 : 1

(ii) Debt to Total Assets Ratio = `"Long term Debt"/"Total Assets"`

Long-term Debt = Long-term Borrowings

= ₹ 1,20,000

Total Assets = Share Capital + General Reserve + Profit & Loss Balance + 9% Debentures + Current Liabilities

= ₹ 3,20,000 + ₹ 1,00,000 + ₹ 48,000 + ₹ 1,20,000 + ₹ 3,04,000

= ₹ 8,92,000

Debt to Total Assets Ratio = `(₹ 1,20,000)/(₹ 8,92,000) xx 100`

= 0.13 : 1

(iii) Proprietary Ratio = `"Shareholder’s Funds"/"Total Assets"`

= `(₹ 4,68,000)/(₹ 8,92,000) xx 100`

= 52.47%