Question

Share Capital ₹ 8,00,000; Reserve and Surplus ₹ 4,00,000; General Reserve ₹ 1,00,000; and Total Assets ₹ 20,00,000. Proprietary Ratio will be ______.

Options

• 0.4 : l

• 0.55 : l

• 0.6 : 1

• 0.65 : 1

Answer 1

Share Capital ₹ 8,00,000; Reserve and Surplus ₹ 4,00,000; General Reserve ₹ 1,00,000; and Total Assets ₹ 20,00,000. Proprietary Ratio will be 0.6 : 1.

Explanation:

Proprietary Ratio = `"Shareholder’s Funds"/"Total Assets"`

Shareholder’s Funds = Share Capital + Reserve and Surplus

= 8,00,000 + 4,00,000

= ₹ 12,00,000

Proprietary Ratio = `(12,00,000)/(20,00,000)`

= 0.6 : 1

Note: General Reserve will be ignored since these are already included in Reserve & Surplus.