Question

Shareholders’ funds ₹ 80,000, Total Debt ₹ 1,80,000, Current Liabilities ₹ 20,000. Total Assets Debt Ratio will be ______.

Options

• 4 : 3

• 3 : 4

• 1.63 : 1

• 8 : 13

Answer 1

Shareholders’ funds ₹ 80,000, Total Debt ₹ 1,80,000, Current Liabilities ₹ 20,000. Total Assets Debt Ratio will be 1.63 : 1.

Explanation:

\[\text{Long-term Debt (Debt)} = \text{Total Debt} - \text{Current Liabilities}\]

$$\text{Long-term Debt (Debt)} = ₹1,80,000 - ₹20,000 = {₹1,60,000}$$

$$\text{Total Assets} = \text{Shareholders' Funds} + \text{Total Debt}$$

$$\text{Total Assets} = ₹80,000 + ₹1,80,000 = {₹2,60,000}$$

$$\text{Total Assets to Debt Ratio} = \frac{\text{Total Assets}}{\text{Long-term Debt}}$$

$$\text{Total Assets to Debt Ratio} = \frac{₹2,60,000}{₹1,60,000} = \frac{13}{8} = {1.625 : 1 \text{ (or } 1.63 : 1{)}}$$