Question

From the following information, calculate ‘Proprietary Ratio’ and ‘Debt-to-Equity Ratio’:

	(₹)
Equity Share Capital	3,00,000
Preference Share Capital	1,00,000
Reserves and Surplus	1,00,000
Plant and Machinery	3,50,000
Non-Current Investments	1,00,000
Current Assets	2,00,000
Long-term Borrowings	1,50,000

Answer 1

Shareholders’ Funds (Equity):

Equity Share Capital + Preference Share Capital + Reserves and Surplus

3,00,000 + 1,00,000 + 1,00,000 = 5,00,000

Total Assets:

Plant and Machinery + Non-Current Investments + Current Assets

3,50,000 + 1,00,000 + 2,00,000 = 6,50,000

Debt (Long-term Liabilities):

Long-term Borrowings = 1,50,000

A. Proprietary Ratio:

`"Shareholders’ Funds"/"Total Assets"`

`(5,00,000)/(6,50,000) = 0.769 : 1 or 0.77 : 1`

B. Debt-to-Equity Ratio:

`"Debt"/"Equity"`

`(1,50,000)/(5,00,000) = 0.3 : 1`