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Question
From the following information, calculate ‘Total Assets to Debt Ratio’:
| Particulars | ₹ | Particulars | ₹ |
|---|---|---|---|
| Current Assets | 8,00,000 | 9% Long-term Bank Loan | 1,00,000 |
| Current Liabilities | 5,00,000 | Shareholders’ Funds | 15,00,000 |
| 10% Debentures | 4,00,000 |
Numerical
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Solution
Calculation of Debt (Long-term Debt):
\[\text{Debt} = \text{10\% Debentures} + \text{9\% Long-term Bank Loan}\]
$$\text{Debt} = ₹ 4,00,000 + ₹ 1,00,000$$
$${\text{Debt} = ₹ 5,00,000}$$
Calculation of Total Assets:
$$\text{Total Assets} = \text{Shareholders' Funds} + \text{Debt (Long-term Liabilities)} + \text{Current Liabilities}$$
$$\text{Total Assets} = ₹ 15,00,000 + ₹ 5,00,000 + ₹ 5,00,000$$
$${\text{Total Assets} = ₹ 25,00,000}$$
Calculation of Total Assets to Debt Ratio:
$$\text{Total Assets to Debt Ratio} = \frac{\text{Total Assets}}{\text{Debt}}$$
$$\text{Total Assets to Debt Ratio} = \frac{25,00,000}{5,00,000} = 5$$
Total Assets to Debt Ratio = 5 : 1
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