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Question
From the following information, calculate the Debt to Capital Employed Ratio:
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| Capital Employed | 87,00,000 | Cash and Cash Equivalents | 7,20,000 |
| Investments | 4,80,000 | Equity Share Capital | 45,00,000 |
| Machinery | 14,00,000 | 8% Debentures | 36,00,000 |
| Trade Receivables | 8,00,000 | Capital Reserve | 6,80,000 |
Surplus, i.e., Balance in Statement of Profit & Loss: (₹ 1,00,000).
Numerical
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Solution
Calculation of Debt (Long-term Debt):
\[\text{Debt} = \text{8\% Debentures}\]
$${\text{Debt} = ₹ 36,00,000}$$
Calculation of Capital Employed:
The problem directly states the total Capital Employed amount:
$${\text{Capital Employed} = ₹ 87,00,000}$$
Calculation of Debt to Capital Employed Ratio:
$$\text{Debt to Capital Employed Ratio} = \frac{\text{Debt}}{\text{Capital Employed}}$$
$$\text{Debt to Capital Employed Ratio} = \frac{36,00,000}{87,00,000} = \frac{36}{87} \approx 0.4137$$
Debt to Capital Employed Ratio = 0.41 : 1
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