Question

From the following, calculate the ‘Debt to Capital Employed Ratio’:

Particulars	₹
9% Debentures	2,00,000
8% Public Deposits	5,00,000
Long-term Provisions	2,00,000
Equity Share Capital	8,00,000
Reserves and Surplus	5,00,000

Answer 1

Calculation of Debt (Long-term Debt):

\[\text{Debt} = \text{9\% Debentures} + \text{8\% Public Deposits} + \text{Long-term Provisions}\]

$$\text{Debt} = ₹ 2,00,000 + ₹ 5,00,000 + ₹ 2,00,000$$

$${\text{Debt} = ₹ 9,00,000}$$

Calculation of Shareholders’ Funds (Equity):

$$\text{Shareholders' Funds} = \text{Equity Share Capital} + \text{Reserves and Surplus}$$

$$\text{Shareholders' Funds} = ₹ 8,00,000 + ₹ 5,00,000$$

$${\text{Shareholders' Funds} = ₹ 13,00,000}$$

Calculation of Capital Employed:

$$\text{Capital Employed} = \text{Shareholders' Funds} + \text{Debt}$$

$$\text{Capital Employed} = ₹ 13,00,000 + ₹ 9,00,000$$

$${\text{Capital Employed} = ₹ 22,00,000}$$

Calculation of Debt to Capital Employed Ratio:

$$\text{Debt to Capital Employed Ratio} = \frac{\text{Debt}}{\text{Capital Employed}}$$

$$\text{Debt to Capital Employed Ratio} = \frac{9,00,000}{22,00,000} = \frac{9}{22} \approx 0.409$$

Debt to Capital Employed Ratio = 0.41 : 1