Question

From the following information, calculate the Debt to Capital Employed Ratio:

Particulars	₹
Shareholders’ Funds	24,00,000
Long-term Borrowings (9% Debentures)	12,00,000
Current Liabilities	2,00,000
Non-current Assets	28,00,000
Current Assets	10,00,000

Answer 1

Calculation of Debt (Long-term Debt):

\[\text{Debt} = \text{Long-term Borrowings}\]

$${\text{Debt} = ₹ 12,00,000}$$

Calculation of Capital Employed:

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

$$\text{Capital Employed} = ₹ 24,00,000 + ₹ 12,00,000$$

$${\text{Capital Employed} = ₹ 36,00,000}$$

Calculation of Debt to Capital Employed Ratio:

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

$$\text{Debt to Capital Employed Ratio} = \frac{12,00,000}{36,00,000} = \frac{1}{3} \approx 0.3333$$

Debt to Capital Employed Ratio = 0.33 : 1